Do changes in payroll taxes incur asymmetric effects on salaries and employment for youth in Sweden

Abstract

This thesis evaluates what effects, and if they are asymmetric, consecutive changes to the payroll tax policy in Sweden has on the intended population, individuals under the age of 26. This analysis is done by using yearly aggregated data from Statistics Sweden which includes a large proportion of the workforce in Sweden from 2004 until 2020. Two separate events are analyzed using a Difference-in-Difference framework and using differences in different age groups as control and treatment. The results indicate that wages might be more slow-moving than employment especially downwards. Through robustness checks with a more homogeneous sample evidence of asymmetric effect from consecutive changes in the payroll tax is found. By researching a subject yet to be researched in Sweden, both the raising of the payroll tax in 2015 and the presence of potential asymmetric effects from changes, this thesis contributes to a growing amount of research into tax incidence as well as provides a deeper understanding of how labor market responses work and provide better understanding for policymakers.