In 2007, the Swedish employer-paid payroll tax was reduced substantially for young workers. We estimate the labor market response for different ages, and at different phases of the business cycle. The overall impact on employment and wages is relatively small, implying an average labor demand elasticity for young workers at around −0.32. While the effect on wages is consistently small, the employment effect differs markedly across ages and over the business cycle. For 21-22 year-old workers, the employment increase is 4-5 times larger than for 25-year-olds, and the estimated demand elasticities are strongly procyclical, approaching zero in the deep 2009 recession. These results suggest that payroll tax reductions need to be narrowly targeted, and carefully timed, in order to be effective. In addition, we find * Previous versions of this paper has been published as Egebark and Kaunitz (2013) and Kaunitz (2017). We thank

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractIt has been alleged since its inception that the WTO Dispute Settlement (DS) mechanism is biased against developing countries, as manifested in e.g. allegedly too low rates of dispute initiation. To shed light on this issue, this study analyses the determinants of developing country participation in the DS system, using bilateral industry-level trade data, and a data set on dispute initiation that is significantly richer than what has been employed in the literature. But the study also points to a number of fundamental conceptual and data problems that beset the whole empirical literature that seeks to draw policy conclusions based on country participation in the DS system. While perhaps appreciated by researchers working in this area, these problems appear to go unnoticed by practitioners drawing on this literature. LDCs into an "LDC Union" for the handling of complaints in the DS system. This Union is instructed to base its decisions concerning litigation on the combined exports of its members, and would draw on the combined resources of the countries in other respects.The model predicts that a country with the characteristics of this "LDC Union" would have 2 initiated roughly twice as many disputes as the model predicts that this group of countries would have launched if acting individually. One should be careful not to over-emphasize the validity of this magnitude. More interesting is that this experiment suggests that LDCs may have so few disputes not only because of small trade volumes, or because of small GDP levels, but also because of the interaction between such explanatory factors.The second question we examine is the common perception in the policy literature that the LDC trade composition explains their seemingly low participation rates. To this end we make the further thought experiment of letting the export structure of this "LDC Union" be the same as the average of the exports of G2, Earlier Industrialized and NewlyIndustrialized countries, while keeping the total volume of exports unchanged. This "LDC Union" is hence in terms of industry export structure a replica of the richer countries, but is in other respects an aggregation of LDCs. Using the estimated model, this change in export composition would have a fairly limited impact on dispute initiation by LDC, contrary to what is often suggested. In other words, the composition of trade does not appear to be a determining factor.We would fi...

The Swedish employer paid payroll tax was reduced substantially for young workers in 2007, causing firms' average social fees to depend on the age structure of their employees. Using pre-reform conditions to define treated and control firms, we show that the lower costs induced by the reduced taxes have no impact on exit rates or profitability. We find negligible effects on gross investments, and negative, but not statistically significant, effects on labor productivity.