Tax policy in a model of search with training
AbstractThis paper develops a model of search on the labour market with training. The model reveals how the tax system can restore the social optimum if the Hosios condition is not satisfied in the private equilibrium. Furthermore, the effects are explored of a second-best reform from a specific tax per job to a marginal wage tax, when a given amount of public revenue has to be raised.� We find that (i) a marginal wage tax is less distortionary to raise revenue than is a specific tax per job, provided that training is not distorted initially; (ii) this conclusion may reverse in the presence of training distortions; (iii) marginal wage taxes are less distortionary in economies characterized by commitment in wage bargaining, such as the European labour market. Hence, tax reforms that reduce the tax burden per job and raise the marginal wage tax, such as an EITC or a negative income tax, are more attractive in Europe than in the US.
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Bibliographic InfoPaper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Research Memorandum with number 161.
Date of creation: Feb 2000
Date of revision:
Other versions of this item:
- Boone, J. & Mooij, R.A. de, 2000. "Tax Policy in a Model of Search with Training," Discussion Paper 2000-07, Tilburg University, Center for Economic Research.
- Boone, J. & Mooij, R.A. de, 2000. "Tax Policy in a Model of Search with Training," Open Access publications from Tilburg University urn:nbn:nl:ui:12-83745, Tilburg University.
- Jan Boone & Ruud A. De Mooij, 2000. "Tax Policy in a Model of Search with Training," CESifo Working Paper Series 232, CESifo Group Munich.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- J0 - Labor and Demographic Economics - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-04-25 (All new papers)
- NEP-LAB-2002-04-25 (Labour Economics)
- NEP-PBE-2002-04-25 (Public Economics)
- NEP-PUB-2002-04-25 (Public Finance)
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