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Pareto-Improving Unemployment Policies

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  • Jörg Lingens
  • Klaus Wälde

Abstract

We investigate how continental European unemployment can be reduced without reducing unemployment benefits and without reducing the net income of low-wage earners. Lower unemployment replacement rates reduce unemployment, the net wage and unemployment benefits. A lower tax on labour increases net wages and - for certain benefit-systems - unemployment benefits as well. Combining these two policies allows to reduce unemployment in countries with “net-Bismarck” and Beveridge systems without reducing net income of workers or of the unemployed. Such a policy becomes self-financing under realistic parameter constellations when taxes are reduced only for low-income workers.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1807.

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Date of creation: 2006
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Handle: RePEc:ces:ceswps:_1807

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Keywords: inequality; unemployment; taxation; policy reform;

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Cited by:
  1. Goerke, Laszlo & Pannenberg, Markus & Ursprung, Heinrich W., 2007. "A Positive Theory of the Earnings Relationship of Unemployment Benefits," IZA Discussion Papers 3003, Institute for the Study of Labor (IZA).
  2. Daniel Cardona & Fernando Sánchez-Losada, 2004. "The Unemployment Benefit System: a Redistributive or an Insurance Institution?," DEA Working Papers, Universitat de les Illes Balears, Departament d'Economía Aplicada 8, Universitat de les Illes Balears, Departament d'Economía Aplicada.
  3. Jörg Lingens & Klaus Wälde, 2006. "Pareto-Improving Unemployment Policies," CESifo Working Paper Series 1807, CESifo Group Munich.
  4. Niklas Potrafke, 2010. "Labor market deregulation and globalization: empirical evidence from OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, Springer, vol. 146(3), pages 545-571, September.
  5. Erkki Koskela & Panu Poutvaara, 2008. "Outsourcing and Labor Taxation in Dual Labor Markets," CESifo Working Paper Series 2333, CESifo Group Munich.

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