Value-Added Tax versus Social Security Contributions
AbstractIn order to alleviate unemployment it is often recommended to reduce social security contributions (SSC) and to compensate for the ensuing loss in revenues by a rise in the value-added tax (VAT). Assuming unemployment to be caused by efficiency wages, it is shown that a balanced-budget shift from a payroll tax to a VAT will increase employment if the rise in the VAT does not alter consumer prices. If the effects of a shift from SSC to the VAT on the worker*s effort are neutralized, for example, by imposing a constant wedge, the employment impact will depend on the nature of the unemployment compensation system.
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Bibliographic InfoArticle provided by Justus-Liebig University Giessen, Department of Statistics and Economics in its journal Journal of Economics and Statistics.
Volume (Year): 219 (1999)
Issue (Month): 3+4 (September)
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More information through EDIRC
efficiency wages; social security contributions; unemployment; value-added tax;
Other versions of this item:
- Goerke, Laszlo, 1999. "Value-added Tax versus Social Security Contributions," IZA Discussion Papers 55, Institute for the Study of Labor (IZA).
- H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
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