Using registry data on over 300,000 firms in Korea, we examine the effects of subsidizing payroll tax to the National pension and the Unemployment insurance on the number of covered workers. Exploiting variations in location and size of firms which affected eligibility for the program, we implement a difference-in-differences in order to identify the effect of subsidies. Our DD estimates show that the subsidy program increased the number of workers covered by the National pension by 1.34 percent. In contrast, we find no effects of the subsidy program on the number of workers covered by the Unemployment Insurance. These estimates are smaller in size than those reported in previous studies implying massive fiscal drains from the subsidy program. The minimal effects and large deadweight of the subsidy scheme may be explained by the design features of the subsidy program in Korea.

This paper studies the incidence of payroll taxes and the effects of payroll taxes on the input choices of firms. We exploit the abolition of size-based capital depreciation threshold in Finland above which employer-level payroll tax rates increased, creating a tax notch. We report large local impacts on firm distribution and dynamics, which also extend very far from the threshold. Our results indicate that these responses are not driven by the most obvious avoidance or evasion channels, such as firm splits or misreporting. Our first results suggests only a small response in employee-level net-of-payroll-tax wages. Instead, we find large firm-level employment effects. Our first incidence estimates suggest 43–57 split between firm owners and workers, respectively. Also, investments and sales increase after the payroll tax cut, suggesting that a decrease in labor costs affects the level of capital and scale of businesses.

Short-time work is a government program that subsidizes reductions in worker's hours during temporary and unexpected economic shocks. Despite growing evidence showing positive employment and firm survival effects, yet unsettled is the evaluation of the policy welfare consequences, especially fiscal externalities from opportunistic behaviors of firms. Through theoretical and empirical analyses, this study examines the impact of financial disincentives on short-time work adoption, layoff, and job openings behaviors. On the theoretical side, it extends the random search and matching framework of Cahuc, Kramarz, and Nevoux (2021). It applies it to Belgium, where experience rating in short-time work binds if firms allocate subsidized hours above a given cutoff to a single job. To provide compelling causal evidence on firms' behavioral responses to experience rating, it relies on rich administrative data on short-time work in Belgium. It leverages a bunching estimator and discontinuities in experience rating costs to firms.