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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 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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Bibliographic Info

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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Keywords: Labor taxation; Job destruction rate; Employment;

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  11. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, vol. 19(2), pages 131-147, April.
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