Low-Wage Employment Subsidies in a Labor-Turnover Model of the 'Natural Rate'
AbstractThis paper models two kinds of wage subsidy in a model of the natural rate having a continuum of workers ranked by their productivity - a flat wage subsidy and a graduated wage subsidy, each financed by a proportional payroll tax. In the small open economy case, with the graduation as specified, we show that both schemes expand employment throughout the distribution; for those whose productivity is sufficiently far below the mean, take-home pay is unambiguously up, though the tax financing lowers take-home pay at the mean and above.
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Bibliographic InfoPaper provided by Indiana - Center for Econometric Model Research in its series Papers with number 98-004.
Length: 29 pages
Date of creation: 1998
Date of revision:
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Postal: Indiana University, Center for Econometric Model Research, Department of Economics; Bloomington, IN 47405.
Web page: http://www.indiana.edu/~econweb/
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EMPLOYMENT ; WAGES ; SUBSIDIES;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
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- Robin Boadway, 2012. "Recent Advances in Optimal Income Taxation," Hacienda Pública Española, IEF, vol. 200(1), pages 15-39, March.
- Engelhardt, Bryan & Rocheteau, Guillaume & Rupert, Peter, 2008.
"Crime and the labor market: A search model with optimal contracts,"
Journal of Public Economics,
Elsevier, vol. 92(10-11), pages 1876-1891, October.
- Bryan Engelhardt & Guillaume Rocheteau & Peter Rupert, 2007. "Crime and the labor market: a search model with optimal contracts," Working Paper 0715, Federal Reserve Bank of Cleveland.
- Engelhardt, Bryan & Rocheteau, Guillaume & Rupert, Peter, 2007. "Crime and the Labor Market in a Search Model with Pairwise-Efficient Separations," University of California at Santa Barbara, Economics Working Paper Series qt72r6g75d, Department of Economics, UC Santa Barbara.
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