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Estimating the Impact of Changes in Employers' National Insurance Contributions on Wages, Prices and Employment

This article explains how changes in payroll taxes might affect real wages and employment. It then estimates the responses of relative wages, prices and employment to the changes in employers' National Insurance Contributions (NICs) that occurred in 1999. The empirical evidence is based on industry-level data and exploits valuable variation in the extent to which these changes in the payroll tax affected different industries.