Working Paper Series no. 41: Widening of the social security basis : from a wage to a value added basis - impact on french non financial firms (in French)

Abstract

It is often claimed that the current basis upon which the French social security contributions are calculated, namely the wage bill, penalises employment, by increasing labor costs and consequently encouraging firms to substitute capital for labor. Broadening this basis by incorporating some elements of capital income is sometimes presented as an alternative that has less negative effect on employment. Using a variance analysis based on annual balance sheet data for 113 000 non financial firms liable to corporate tax, this study tries to characterise the firms that benefit most (or suffer least, which is equivalent), in terms of social security contributions, from a widening of the contribution basis. Several alternatives of this wider social security tax base are tested, depending on the value added definition chosen.

Gilbert Cette and Elisabeth Kremp
October 1997

Classification JEL : J30, E25

Keywords : Social Contribution, Wage, Employment, Firms