How costly are taxes for young firms? In this paper, we demonstrate that even small payroll taxes significantly distort entry, growth, and hiring decisions. First, leveraging cross-sectional variation in the taxes faced by new employers, we find that higher taxes discourage new firms from hiring...

We analyze unique data on three sources of information on the probability of re‑employment within 6 months (RE6), for the same individuals sampled from the inflow into unemployment. First, they were asked for their perceived probability of RE6. Second, their caseworkers revealed whether they...