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Reducing Social Contributions for Unskilled Labor as a Way of Fighting Unemployment: An Empirical Evaluation for the Case of Spain

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  • Oscar Bajo-Rubio
  • Antonio G. Gómez-Plana

Abstract

We provide an empirical evaluation of the effects of a cut in social security contributions (i) for all types of labor and (ii) only for unskilled labor, within a computable generalequilibrium model simulation of the Spanish economy. The model allows firms to follow a noncompetitive price rule, and incorporates an equal-yield assumption, which means that the reduction in social security contributions is compensated with an increase in value-added tax rates, so the public-sector deficit is not affected. In addition, the labor market is assumed to follow a matching unemployment rule, which allows us to model in a simple way any frictions present in that market.

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Bibliographic Info

Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 60 (2004)
Issue (Month): 2 (August)
Pages: 160-

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200408)60:2_160:rscful_2.0.tx_2-3

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Keywords: computable general equilibrium models (CGE); unemployment; unskilled labor; social contributions;

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References

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  1. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
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  3. Barbara Petrongolo & Christopher A. Pissarides, 2000. "Looking Into the Black Box: A Survey of the Matching Function," CEP Discussion Papers dp0470, Centre for Economic Performance, LSE.
  4. P. BISCOURP & Ch. GIANELLA, 2001. "Substitution and complementarity between capital, skilled and less skilled workers: an analysis at the firm level in the French manufacturing industry," Documents de Travail de la DESE - Working Papers of the DESE g2001-13, Institut National de la Statistique et des Etudes Economiques, DESE.
  5. Inmaculada Garcia & Jose Alberto Molina, 1998. "Household labour supply with rationing in Spain," Applied Economics, Taylor & Francis Journals, vol. 30(12), pages 1557-1570.
  6. James R. Markusen, 1990. "Micro-foundations of External Economies," Canadian Journal of Economics, Canadian Economics Association, vol. 23(3), pages 495-508, August.
  7. P. B. Sørensen, 1997. "Public finance solutions to the European unemployment problem?," Economic Policy, CEPR & CES & MSH, vol. 12(25), pages 221-264, October.
  8. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
  9. Dougherty, C R S, 1972. "Estimates of Labor Aggregation Functions," Journal of Political Economy, University of Chicago Press, vol. 80(6), pages 1101-19, Nov.-Dec..
  10. Dervis, Kemal & de Melo, Jaime & Robinson, Sherman, 1981. "A General Equilibrium Analysis of Foreign Exchange Shortages in a Developing Economy," Economic Journal, Royal Economic Society, vol. 91(364), pages 891-906, December.
  11. Balistreri, Edward J., 2002. "Operationalizing equilibrium unemployment: A general equilibrium external economies approach," Journal of Economic Dynamics and Control, Elsevier, vol. 26(3), pages 347-374, March.
  12. Alfredo M. Pereira, 1995. "Equal Yield Tax Alternatives and Government Deficits," Public Finance Review, , vol. 23(1), pages 40-71, January.
  13. Shoven, John B. & Whalley, John, 1977. "Equal yield tax alternatives : General equillibrium computational techniques," Journal of Public Economics, Elsevier, vol. 8(2), pages 211-224, October.
  14. Dreze, Jacques H. & Malinvaud, Edmond, 1994. "Growth and employment: The scope of a European initiative," European Economic Review, Elsevier, vol. 38(3-4), pages 489-504, April.
  15. Scarf,Herbert E. & Shoven,John B., 2008. "Applied General Equilibrium Analysis," Cambridge Books, Cambridge University Press, number 9780521070935.
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Citations

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Cited by:
  1. Antonio G. Gómez-Plana & Oscar Bajo-Rubio, . "Algunos efectos del mercado único europeo sobre la economía española: Un análisis a través de un modelo de equilibrio general aplicado," Studies on the Spanish Economy 213, FEDEA.
  2. Oscar Bajo-Rubio & Antonio G. Gómez-Plana, . "Simulating the effects of the European single market: a CGE analysis for Spain," Studies on the Spanish Economy 208, FEDEA.
  3. Volker Meinhardt & Rudolf Zwiener, 2005. "Gesamtwirtschaftliche Wirkungen einer Steuerfinanzierung versicherungsfremder Leistungen in der Sozialversicherung: Endbericht ; Forschungsprojekt im Auftrag des DGB Bundesvorstandes, der Hans-Böckle," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 7, number pbk7, July.
  4. Antonio Gómez Gómez-Plana, . "Simulación De Políticas Económicas: Los Modelos De Equilibrio General Aplicado," Working Papers 35-02 Classification-JEL , Instituto de Estudios Fiscales.
  5. Latorre, María C. & Bajo-Rubio, Oscar & Gómez-Plana, Antonio G., 2009. "The effects of multinationals on host economies: A CGE approach," Economic Modelling, Elsevier, vol. 26(5), pages 851-864, September.

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