According to the conventional wisdom, we face a trade-off between our equity and efficiency objectives. The author challenges this proposition. He shows in a rigorous manner that employment subsidies can indeed lead to lower unemployment and higher productivity growth in a standard economic model. This finding is particularly timely given the announcement by the Canadian government in the November 2005 Economic and Fiscal Update of a Working Income Tax Benefit. The author approvingly notes that this initiative suggests that the government may be starting to appreciate the pro-growth benefits of simultaneously addressing structural unemployment and inequality.
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Find related papers by JEL classification: O51 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - U.S.; Canada O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
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