De Economist

, Volume 165, Issue 2, pp 165–179 | Cite as

Who Bears the Burden of Social Security Contributions in Germany? Evidence from 35 Years of Administrative Data

  • Kai-Uwe Müller
  • Michael Neumann


This paper provides evidence on the question of who bears the burden of social security contributions (SSC) in Germany over a long-term horizon. Following Alvaredo et al. (De Econ, 2017) we exploit kinks in the budget set generated by a drop in the marginal SSC rate at earnings caps for health and long-term care insurance. These concave kinks lead to discontinuities in the distributions of gross earnings, net earnings, or labor costs which—in the absence of labor supply responses—are informative about economic incidence. Administrative data for West Germany from 1975 to 2010 facilitate a comprehensive incidence analysis. Finding no evidence for labor supply responses and no significant discontinuities in gross earnings distributions, we conclude that neither employers nor employees shift a substantial part of their SSC burden. These results are consistent over the whole time period and hold for several robustness checks corroborating previous findings for Germany. A small trend towards a slight increase in the SSC burden for employees is not statistically significant.


Incidence Social security contributions Discontinuities 

JEL Classification

H22 J38 H55 



We would like to thank Peter Haan who read and commented on an earlier draft of this paper. We are also indepted to Stuart Adam, Leon Bettendorf, Nicole Bosch, Antoine Bozio, Thomas Breda, Julien Grenet, Luke Haywood, and Barra Roantree for helpful comments and discussions. This research has been conducted within the project “The Impact of Social Security Contributions on Earnings: Evidence from administrative data in France, Germany, the Netherlands and the UK” (HA 5526/3-1 (ORA)) funded by the German Research Foundation (Deutsche Forschungsgemeinschaft, DFG).


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Copyright information

© Springer Science+Business Media New York 2017

Authors and Affiliations

  1. 1.German Institute for Economic Research BerlinDIW BerlinBerlinGermany

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