The Effects of Subsidizing Social Security Contributions : Job Creation or Informality Reduction?
This paper evaluates the impact of an employment subsidy scheme covering employers’ social contribution costs on registered employment in small firms in Turkey. It utilizes a rich, firm-level administrative data set with monthly frequency, which al...
| Main Authors: | , , , , , |
|---|---|
| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2022
|
| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/undefined/685191642611488161/The-Effects-of-Subsidizing-Social-Security-Contributions-Job-creation-or-Informality-Reduction http://hdl.handle.net/10986/36850 |
| Summary: | This paper evaluates the impact of an
employment subsidy scheme covering employers’ social
contribution costs on registered employment in small firms
in Turkey. It utilizes a rich, firm-level administrative
data set with monthly frequency, which allows for closely
following the dynamics of registered employment in firms
before and after the implementation of the subsidy. The
empirical approach utilizes the geographically targeted
implementation of the subsidy to estimate its effects using
a difference-in-difference specification. The paper finds
that the subsidy scheme had a sizable and positive impact on
registered employment in small firms. The results are robust
across specifications and to the choice of the control
group. Positive effects on formal employment are also fairly
constant and sustained over time. Corroborative evidence
suggests that the positive effects on registered employment
are mainly driven by the formalization of existing workers
as opposed to new job creation. Therefore, the results
indicate that social security contribution subsidies in
small firms can be effective in reducing informality in
contexts where informal employment remains common. |
|---|