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Selective reductions in labor taxation: Labor market adjustments and macroeconomic performance

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  • Batyra, Anna
  • Sneessens, Henri R.

Abstract

We use a calibrated general equilibrium model with heterogeneous labor and search to evaluate the quantitative effects of various labor tax cut scenarios. The focus is on skill heterogeneity combined with downward wage rigidities at the low end of the skill ladder. Workers can take jobs for which they are overeducated. We compare targeted and non-targeted tax cuts, both with or without over-education effects. Introducing over-education changes substantially the employment, productivity and welfare effects of a tax cut, although tax cuts targeted on the least skilled workers always have larger effects.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Policy Modeling.

Volume (Year): 32 (2010)
Issue (Month): 4 (July)
Pages: 531-543

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Handle: RePEc:eee:jpolmo:v:32:y::i:4:p:531-543

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Web page: http://www.elsevier.com/locate/inca/505735

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Keywords: Minimum wage Job creation Job destruction Job competition Search unemployment Taxation Computable general equilibrium models;

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Cited by:
  1. Pascal Belan & Martine Carré & Stéphane Gregoir, 2007. "Subsidizing low-skilled jobs in a dual labor market," THEMA Working Papers 2007-17, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
  2. Raphael A. Espinoza & Esther Pérez Ruiz, 2014. "Labor Tax Cuts and Employment: A General Equilibrium Approach for France," IMF Working Papers 14/114, International Monetary Fund.

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