Shocks and the Unavoidable Road to Higher Taxes and Higher Unemployment
AbstractThis paper considers a matching model in which multiple steady-state unemployment rates exist if government expenditures and unemployment benefits are high enough. The focus on the extensive margin and a possible transition to a steady state with higher unemployment rates imply that the effect of tax rates can be high even when the elasticity between consumption and leisure is low. The matching friction limits transitions between steady states due to self-fulfilling expectations. After a sufficiently large increase in the unemployment rate and after a large enough increase in the tax burden caused by an exogenous increase in government spending, however, transition towards the high-unemployment steady state is unavoidable in an economy with generous unemployment benefits. (Copyright: Elsevier)
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.
Volume (Year): 10 (2007)
Issue (Month): 3 (July)
Contact details of provider:
Postal: Review of Economic Dynamics Academic Press Editorial Office 525 "B" Street, Suite 1900 San Diego, CA 92101
Web page: http://www.EconomicDynamics.org/review.htm
More information through EDIRC
Find related papers by JEL classification:
- C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
- D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005.
"Unemployment: Macroeconomic Performance and the Labour Market,"
Oxford University Press, number 9780199279173, Octomber.
- Layard, Richard & Nickell, Stephen & Jackman, Richard, 1991. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780198284345, Octomber.
- Steve Nickell & Jan van Ours, 2000.
"The Netherlands and the United Kingdom: a European unemployment miracle?,"
CEPR & CES & MSH, vol. 15(30), pages 135-180, 04.
- Nickell, S.J. & Ours, J.C. van, 1999. "The Netherlands and the United Kingdom: A European Unemployment Miracle?," Discussion Paper 1999-119, Tilburg University, Center for Economic Research.
- Ours, J.C. van & Nickell, S.J., 2000. "The Netherlands and the United Kingdom: A European unemployment miracle?," Open Access publications from Tilburg University urn:nbn:nl:ui:12-84119, Tilburg University.
- Ljungqvist, Lars & Sargent, Thomas J., 2007. "Understanding European unemployment with matching and search-island models," Journal of Monetary Economics, Elsevier, vol. 54(8), pages 2139-2179, November.
- Richard Rogerson, 2006. "Understanding Differences in Hours Worked," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 365-409, July.
- Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
- Pissarides, Christopher A., 1998.
"The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure,"
European Economic Review,
Elsevier, vol. 42(1), pages 155-183, January.
- Christopher Pissarides, 1997. "The impact of employment tax cuts on unemployment and wages : the role of unemployment benefits and tax structure," LSE Research Online Documents on Economics 2332, London School of Economics and Political Science, LSE Library.
- Christopher A. Pissarides, 1997. "The Impact of Employment Tax Cuts on Unemployment and Wages: The Role of Unemployment Benefits and Tax Structure," CEP Discussion Papers dp0361, Centre for Economic Performance, LSE.
- Francesco Daveri & Guido Tabellini, .
"Unemployment, Growth and Taxation in Industrial Countries,"
122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 47-104, 04.
- Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
- P. Diamond, 1980.
"Aggregate Demand Management in Search Equilibrium,"
268, Massachusetts Institute of Technology (MIT), Department of Economics.
- Edward C. Prescott, 2004.
"Why do Americans work so much more than Europeans?,"
Federal Reserve Bank of Minneapolis, issue Jul, pages 2-13.
- Edward C. Prescott, 2004. "Why Do Americans Work So Much More Than Europeans?," Levine's Bibliography 122247000000000413, UCLA Department of Economics.
- Edward C. Prescott, 2004. "Why do Americans Work so Much More than Europeans?," NBER Working Papers 10316, National Bureau of Economic Research, Inc.
- Edward C. Prescott, 2003. "Why do Americans work so much more than Europeans?," Staff Report 321, Federal Reserve Bank of Minneapolis.
- François Gourio & Pierre-Alexandre Noual, 2006.
"The Marginal Worker and The Aggregate Elasticity of Labor Supply,"
Boston University - Department of Economics - Working Papers Series
WP2006-009, Boston University - Department of Economics.
- Francois Gourio & Pierre-Alexandre Noual, 2006. "The Marginal Worker and the Aggregate Elasticity of Labor Supply," 2006 Meeting Papers 509, Society for Economic Dynamics.
- Saint-Paul, Gilles, 1992.
"The High Unemployment Trap,"
CEPR Discussion Papers
670, C.E.P.R. Discussion Papers.
- Salvador Ortigueira, 2003. "Unemployment Benefits and the Persistence of European Unemployment," Computing in Economics and Finance 2003 27, Society for Computational Economics.
- Richard Disney, 2000. "The Impact of Tax and Welfare Policieson Employment and Unemployment in OECD Countries," IMF Working Papers 00/164, International Monetary Fund.
- Yongsung Chang & Sun-Bin Kim, 2003.
"From individual to aggregate labor supply : a quantitative analysis based on a heterogeneous agent macroeconomy,"
03-05, Federal Reserve Bank of Richmond.
- Yongsung Chang & Sun-Bin Kim, 2006. "From Individual To Aggregate Labor Supply: A Quantitative Analysis Based On A Heterogeneous Agent Macroeconomy ," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(1), pages 1-27, 02.
- Yongsung Chang & Sun-Bin Kim, 2003. "From Individual to Aggregate Labor Supply: A Quantitative Analysis Based on a Heterogeneous Agent Macroeconomy," Macroeconomics 0307003, EconWPA.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christian Zimmermann).
If references are entirely missing, you can add them using this form.