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Layoff taxes and minimum wage: Two complementary public policies

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  • Gavrel, Frédéric
  • Lebon, Isabelle
  • Rebière, Thérèse

Abstract

In a matching model in which the job destruction rate and the output are endogenous, we show that the presence of a binding minimum wage prompts firms to choose too risky jobs. Introducing layoff taxes therefore reduces unemployment and improves market efficiency.

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Bibliographic Info

Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 107 (2010)
Issue (Month): 1 (April)
Pages: 30-32

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Handle: RePEc:eee:ecolet:v:107:y:2010:i:1:p:30-32

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Web page: http://www.elsevier.com/locate/ecolet

Related research

Keywords: Employment protection Layoff taxes Minimum wage Equilibrium unemployment Market efficiency;

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  1. Blanchard, Olivier J & Tirole, Jean, 2007. "The Joint Design of Unemployment Insurance and Employment Protection. A First Pass," CEPR Discussion Papers 6127, C.E.P.R. Discussion Papers.
  2. Williamson, Stephen D. & Wang, Cheng, 1999. "Moral Hazard, Optimal Unemployment Insurance, and Experience Rating," Working Papers 99-03, University of Iowa, Department of Economics.
  3. Dale T. Mortensen & Christopher A. Pissarides, 1993. "Job Creation and Job Destruction in the Theory of Unemployment," CEP Discussion Papers dp0110, Centre for Economic Performance, LSE.
  4. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
  5. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  6. Hosios, Arthur J, 1990. "On the Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 57(2), pages 279-98, April.
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