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Wage Effects of Non-wage Labour Costs

Cervini-Plá, María, Ramos, Xavier, Silva Becerra, Jose I. (2014) Wage Effects of Non-wage Labour Costs. European Economic Review, 72 . pp. 113-137. ISSN 0014-2921. (doi:10.1016/j.euroecorev.2014.09.005) (KAR id:43322)


We study wage effects of two important elements of non-wage labour costs: firing costs and payroll taxes. We exploit a reform that introduced substantial reduction in these two provisions for unemployed workers aged less than 30 and over 45 years who got a permanent job. A matching model with heterogeneous workers predicts positive wage effects of reducing firing costs but ambiguous wage effects of reducing payroll taxes, for both new entrant and incumbent workers. Difference-in-differences estimates and simulation of the model show positive wage effects for both new entrant and incumbent workers. The reduction in firing costs accounts for up to half of the overall wage increase for new entrants but only 10% for incumbents.

Item Type: Article
DOI/Identification number: 10.1016/j.euroecorev.2014.09.005
Uncontrolled keywords: Dismissal costs; Payroll tax; Evaluation of labour market reforms; Difference-in-difference; Matching model
Subjects: H Social Sciences > HB Economic Theory
Divisions: Divisions > Division of Human and Social Sciences > School of Economics
Depositing User: Jose Silva Becerra
Date Deposited: 13 Oct 2014 15:05 UTC
Last Modified: 09 Dec 2022 01:28 UTC
Resource URI: (The current URI for this page, for reference purposes)

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Silva Becerra, Jose I..

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