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Designing a Capitalist Economy for Fast Growth and High Employment in Today's Globalized World Economy

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Abstract

The paper begins with a consideration of the hypothesis that public sector employment is a means to reduce the general unemployment rate. It then takes up the proposition that subsidizing domestic investment is an effective way to reduce unemployment. The rest of the paper addresses some of the questions arising about employment subsidies as a means to reduce unemployment. A crucial question is the best way to finance an employment subsidy. Is it a payroll tax? a Value Added Tax? if enforceable, some sort of tax on wealth or non-wage income? Or is the best answer a cutback in welfare entitlements - in "social wealth" - which would permit the introduction of employment subsidies without widening the budgetary deficit. The paper goes on to consider the hypothesis that, in the medium term and beyond, the best remedy is a cut of tax rates (on labor, possibly on domestic capital) financed by the same cutback in welfare entitlements.

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  • Edmund S. Phelps, 1998. "Designing a Capitalist Economy for Fast Growth and High Employment in Today's Globalized World Economy," Journal of Applied Economics, Universidad del CEMA, vol. 1, pages 87-103, November.
    • Handle: RePEc:cem:jaecon:v:1:y:1998:n:1:p:87-103
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