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2010-09-02


CASE Network Studies and Analyses
No. 398   Social Security Driven Tax Wedge and Its Effects On Employment and Shadow Employment
Authors: Marek Gora
Oleksandr Rohozynsky
Irina Sinitsina
Mateusz Walewski
Series: CASE Network Studies and Analyses
Year of issue: 2009
Project: ESCIRRU - Economic and Social Consequences of Industrial Restructuring in Russia and Ukraine
The paper discusses possible directions and magnitudes of the relationship between the social security driven tax wedge, employment and shadow employment in Russia and Ukraine. The first section presents a summary of the economic and institutional background for development of the current size and structure of the socially driven tax wedge in both countries. The second section presents some theoretical considerations on the relationship between the social protection system, tax wedge, non-employment and finally, shadow employment. The third section contains an attempt to econometrically estimate the magnitude of the possible relationship between the tax wedge and total employment rates in both countries. In the fourth section, the authors try to discover the mechanism of influence of the last reform of the Ukrainian payroll tax system on the structure and size of shadow employment in the country. The last analytical section closes the circle leading the reader back from shadow employment to wages and finally to the issue of access to social security institutions. The last section concludes.
Keywords: social security, employment, shadow employment, tax wedge, payroll taxes, reform, CIS countries, Russia, Ukraine
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