"Sänkt Arbetsgivaravgift och Efterfrågan på Utbildning - Har en sänkt arbetsgivaravgift för ungdomar inneburit en lägre efterfrågan på högre utbildning? "
Reduced Payroll Tax and Demand for Education.
This paper uses official statistics gathered from Statistics Sweden in order to evaluate if the payroll tax cuts from 2007 and 2009 had an impact on the demand for higher education in Sweden. In 2007, the Swedish government reduced the payroll tax for all youths 18-25. The tax cut was further extended in 2009 with a lower tax rate and covered all youths aged 26 or below. After 9 years, the tax cut was repealed in 2016 and returned to a higher general rate for all ages. By exploiting the tax cuts as a natural experiment, we estimate their effect with a Difference-in-Difference analysis. Three different treatment periods are used, one for each tax cut and one post reform period. Based on labor economics theory, it is expected that the reduced payroll tax will increase the employment rate or/and wages. Therefore, the opportunity cost for attending higher education will increase after the tax cuts, hence the economic theory predicts a negative effect on the demand for higher education. The results did not provide statistically significant effects in the different treatment periods. Thus, the conclusion is that the payroll tax cuts did not have an impact on the demand for higher education.