The Contribution of Payroll Taxation to Wage Inequality in France

Malka Guillot (1, 2) , Antoine Bozio (3, 4) , Thomas Breda (3, 4)

1 CREST - Centre de Recherche en Économie et Statistique
2 ETH Zürich - Eidgenössische Technische Hochschule - Swiss Federal Institute of Technology [Zürich]
3 PSE - Paris-Jourdan Sciences Economiques
4 PSE - Paris School of Economics

Over the 1967-2015 period, net wage inequality has decreased in France by 25%, in contrast to the significant increase experienced by most developed countries. Less well known is the fact that labor cost inequality has actually increased by 8% over the same period. We show that, (a) standard demand-side explanations for the rise in inequality apply in France when tested using measures of labor cost (as they should be); (b) reforms to payroll taxation, jointly with increases in the minimum wage, can explain a large part of the decrease in net wage inequality, in the context of increasing market inequality.

Mots clés: wage inequality; labor cost; payroll tax; tax incidence

Domaines: Economies et finances

Malka Guillot, Antoine Bozio, Thomas Breda. The Contribution of Payroll Taxation to Wage Inequality in France. 2020. ⟨halshs-01294599v2⟩