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 average to marginal taxes 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 an average 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 average tax 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 Tilburg University, Center for Economic Research in its series Discussion Paper with number 2000-07.
Date of creation: 2000
Date of revision:
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Web page: http://center.uvt.nl
fiscal policy; training; job search;
Other versions of this item:
- Jan Boone & Ruud A. De Mooij, 2000. "Tax Policy in a Model of Search with Training," CESifo Working Paper Series 232, CESifo Group Munich.
- Jan Boone & Ruud de Mooij, 2000. "Tax policy in a model of search with training," CPB Research Memorandum 161, CPB Netherlands Bureau for Economic Policy Analysis.
- 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.
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- J0 - Labor and Demographic Economics - - General
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