Olivier, PIERARD (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))
Abstract
To study the impacts of reductions in employer’s 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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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
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