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Article summary:
1. This paper examines the effects of payroll taxes on employee and employer behavior, as well as how to design incentive mechanisms when hiring staff.
2. The paper uses a continuous-time principal-agent model to derive the incentive-compatible condition of the agent’s efforts and examine the principal’s optimal contracts.
3. The paper also analyzes the influences of payroll tax on the agent’s behaviors and the optimal contract.
Article analysis:
The article is generally reliable and trustworthy, as it provides a comprehensive overview of existing research in this area, including works by Holmstrom and Milgrom (1987), Williams (2009), Sannikov (2008), Wang et al. (2020), Anderson et al. (2018), Garrett and Pavan (2015) and Wang and Huang (2016). It also presents an analysis of its own findings in a clear manner, making it easy for readers to understand the implications of its results.
However, there are some potential biases that should be noted. Firstly, while the article does provide an overview of existing research in this area, it does not explore any counterarguments or alternative perspectives that may exist in these studies. Secondly, while it does discuss potential risks associated with payroll taxes, such as their effect on employee behavior, it does not provide any evidence for these claims or explore them in greater detail. Finally, while it does present both sides equally in terms of discussing existing research and its own findings, it does not provide any information about possible solutions or strategies for addressing these issues.