Estimating the Impact of Labor Taxes on Employment and the Balances of the Social Insurance Funds in Turkey
High labor tax wedges and slow formal employment growth have combined to make labor tax reform an important economic policy issue in Turkey. This synthesis report presents the results of a series of empirical studies of the impact of a labor tax re...
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| Language: | English en_US |
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World Bank, Washington, DC
2017
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| Online Access: | http://documents.worldbank.org/curated/en/167581468311115427/Estimating-the-impact-of-labor-taxes-on-employment-and-the-balances-of-the-social-insurance-funds-in-Turkey http://hdl.handle.net/10986/28211 |
| Summary: | High labor tax wedges and slow formal
employment growth have combined to make labor tax reform an
important economic policy issue in Turkey. This synthesis
report presents the results of a series of empirical studies
of the impact of a labor tax reform. The analysis was
undertaken before the social contribution reforms that were
introduced as part of the 2008 employment package. Using
data from firms, households, and social insurance files, the
research finds that employment does respond to changes in
labor costs at levels that are comparable to those found in
other middle-income and Organization for Economic
Co-operation and Development (OECD) countries. The results
show that reducing labor costs could significantly boost
registered employment. However, the actual effect of lower
taxes on employment would be diluted because a significant
portion of the reduced tax will be captured by workers
through higher wages rather than by employers through lower
labor costs. As a result, tax cuts targeted towards low-wage
labor would be more cost-effective than across-the-board
reductions. To achieve overall fiscal neutrality,
compensating additional revenues from other sources or
reduced expenditures will be needed to accompany lower
contribution rates. |
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