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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.

Suggested Citation

  • Oscar Bajo-Rubio & Antonio G. Gómez-Plana, 2004. "Reducing Social Contributions for Unskilled Labor as a Way of Fighting Unemployment: An Empirical Evaluation for the Case of Spain," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(2), pages 160-185, August.
    • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200408)60:2_160:rscful_2.0.tx_2-3
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    Cited by:

    1. Oscar Bajo-Rubio & Antonio G. Gómez-Plana, 2015. "Alternative strategies to reduce public deficits: Taxes vs. spending," Journal of Applied Economics, Universidad del CEMA, vol. 18, pages 45-70, May.
    2. Volker Meinhardt & Rudolf Zwiener, 2005. "Gesamtwirtschaftliche Wirkungen einer Steuerfinanzierung versicherungsfremder Leistungen in der Sozialversicherung: Endbericht ; Forschungsprojekt im Auftrag des DGB Bundesvorstandes, der Hans-Böckler," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 7, number pbk7, January.
    3. Campoy-Muñoz, Pilar & Cardenete Flores, Manuel Alejandro & Delgado, M. Carmen & Hewings, Geoffrey, 2016. "Effects of a reduction in employers' social security contributions: Evidence from Spain," Economics Discussion Papers 2016-32, Kiel Institute for the World Economy (IfW Kiel).
    4. Bajo-Rubio, Oscar & Gomez-Plana, Antonio G., 2005. "Simulating the effects of the European Single Market: A CGE analysis for Spain," Journal of Policy Modeling, Elsevier, vol. 27(6), pages 689-709, September.
    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.
    6. Javier Ferri & Antonio G. Gómez-Plana & Joan A. Martín-Montaner, 2006. "Illegal immigration booms and welfare in the host country," European Journal of Population, Springer;European Association for Population Studies, vol. 22(4), pages 353-370, December.
    7. Antonio Gómez Gómez-Plana, "undated". "Simulación De Políticas Económicas: Los Modelos De Equilibrio General Aplicado," Working Papers 35-02 Classification-JEL , Instituto de Estudios Fiscales.
    8. Mar�a Teresa �lvarez-Mart�nez & Clemente Polo, 2014. "Reduce Employers' Social Security Contributions And Control Labor Fraud: Remedies For Spain'S Ailing Economy?," Economic Systems Research, Taylor & Francis Journals, vol. 26(2), pages 141-154, June.
    9. Antonio G. Gómez-Plana & Oscar Bajo-Rubio, "undated". "Algunos efectos del mercado único europeo sobre la economía espanola: Un análisis a través de un modelo de equilibrio general aplicado," Studies on the Spanish Economy 213, FEDEA.

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    More about this item

    Keywords

    computable general equilibrium models (CGE); unemployment; unskilled labor; social contributions;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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