The Effect Of Social Security Payroll Tax Reductions On Employment And Wages: An Evaluation Of The 2003 French Reform

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The French Fillon reform of 17 January 2003 unified the schemes of payroll tax reductions for firms that had adopted the 35-hour work week and those that had not. This reform had very different effects depending on the category of firms concerned: the payroll tax reductions were considerably greater for the firms that had remained on 39 hours than for the others, particularly for wages situated at around 1.3 times the minimum wage). This paper examines in detail the nature of the reform and its effects on wages and labor costs, before presenting an evaluation of its impact on employment, using a balanced panel of firms with more than 5 employees drawn from a matching between several administrative data sources for the period 2002-2005.