Incidence of Social Security Contributions: Evidence
from France
Antoine Bozio, Thomas Breda, Julien Grenet
Discussion:
Andrea Weber, WU Vienna
February 2016
Discussion Bozio Breda Grenet
SSC
February 2016
1/6
Summary
Effects of social security contributions on earnings and labor costs
Exploit reforms in France 1981 - 2005
Change in employer contributions to SS above the cap SST
Yesterday: SSC reforms related to development of earnings inequality
in France
Today: Detailed evidence from diff-in-diff analysis comparing workers
below and above the SST
Large share of incidence borne by employers even 6 to 8 years after
the reform
Discussion Bozio Breda Grenet
SSC
February 2016
2/6
Comments
Advantages:
Great admin data on balanced panel of employed workers’ net
earnings and labor costs
Measures of short to medium/long run effects
Challenges:
Separate policy changes from behavioral responses
Comments:
Regression Kink Design
Additional research questions
Discussion Bozio Breda Grenet
SSC
February 2016
3/6
RKD
Test for identifying assumptions:
I
I
I
I
I
Is there evidence of bunching in earnings above the SST?
How does the density of earnings around SST change with the reforms?
Density of predetermined variables:
change in earnings, change in SSC in pre-reform years
Predicted earnings growth based on covariates
Motivation for the kink design:
I
I
Marginal SS tax rate is a step-wise function of gross earnings
Why not look at the discontinuity in change in marginal tax rates?
Discussion Bozio Breda Grenet
SSC
February 2016
4/6
Implementation of RKD
Running variable w0i , cutoff SST0
Outcome ∆wyi = wyi − w0i
Policy variable ∆SSCyi = SSCyi − SSC0i
RKD relate change in slope in ∆wyi to change in slope in ∆SSCyi
Fuzzy RKD endogenous variable ∆SSCyi = SSCyi − SSC0i
Problem:
SSCyi is based on wyi and cutoff SSTy
Plot first stage: where is the kink? (might be more illustrative to plot
marg. tax rates)
Plot share of individuals with wyi above SSTy by w0i
ME in location of cutoff is not covered by CLPW(2015).
Discussion Bozio Breda Grenet
SSC
February 2016
5/6
Additional Interesting Questions
Do responses differ if tax is on employers or employees?
How do firms adjust wages? Effects on stayers versus movers
Responses at the firm level: is there a difference in responses of firms
with high/low exposure?
How does SSC affect career progress of high wage workers?
Discussion Bozio Breda Grenet
SSC
February 2016
6/6