Labour costs and the decision to hire the first employee

B. Cockx; Sam Desiere

doi:10.26481/umagsb.2023007

Labour costs and the decision to hire the first employee

B. Cockx, Sam Desiere

Research output: Working paper / Preprint › Working paper

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Abstract

Firms without paid employees account for up to 80% of all firms, but only a small minority ever hires. This paper investigates the relationship between labour costs and the decision to hire a first employee and become an employer. Leveraging a unique policy in Belgium that permanently reduced the labour cost of the first employee by 13%, we find that the number of new, first-time employers jumped by 31% immediately following the reform. The elasticity of the probability to hire the first employee with respect to the labour cost is −2.39 [95% CI: −3.45, −1.25].

Original language	English
Place of Publication	Maastricht
Publisher	Maastricht University, Graduate School of Business and Economics
Number of pages	33
DOIs	https://doi.org/10.26481/umagsb.2023007
Publication status	Published - 8 Jun 2023

Publication series

Series	GSBE Research Memoranda
Number	007
ISSN	2666-8807

JEL classifications

d22 - Firm Behavior: Empirical Analysis
h25 - Business Taxes and Subsidies including sales and value-added (VAT)
j08 - Labor Economics Policies
j23 - Labor Demand
l26 - Entrepreneurship
m13 - "New Firms; Startups"

Keywords

nonemployers
hiring decisions
payroll taxes
small businesses

Access to Document

10.26481/umagsb.2023007

RM23007Final published version, 1.45 MB

Cite this

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