Impact of Selective Reductions in Labor Taxation

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Impact of Selective Reductions in Labor Taxation

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Olivier, PIERARD (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

To study the impacts of reductions in employerÕs social security contributions, we construct an intertemporal general equilibrium model with different types of workers (and wages), search unemployment and endogenous job destruction rates. Our model reproduces the empirical evidence that the impacts on employment, of reductions in contributions at the minimum wage level, go through a decrease in job destructions rather than an increase in job creations. We moreover find that, although it is prejudical to average productivity, reductions targeted at the minimum wage create much more net employment than reductions targeted at other wages.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004035.

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Date of creation: 01 Oct 2004
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Handle: RePEc:ctl:louvir:2004035

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: 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
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-02-13 (All new papers)
NEP-MAC-2005-02-13 (Macroeconomics)

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Other versions:
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Other versions:
- Gilles, Joseph & Olivier Pierrard & Henri R. Sneessens, 2003. "Job Turnover, Unemployment and Labor Market Institutions," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003013, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES). [Downloadable!]
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