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Low-Wage Employment Subsidies in a Labor-Turnover Model of the 'Natural Rate'

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Author Info

  • Hoon, H.T.
  • Phelps, E.S.

Abstract

This 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 Info

Paper provided by Indiana - Center for Econometric Model Research in its series Papers with number 98-004.

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Length: 29 pages
Date of creation: 1998
Date of revision:
Handle: RePEc:fth:indian:98-004

Contact details of provider:
Postal: Indiana University, Center for Econometric Model Research, Department of Economics; Bloomington, IN 47405.
Phone: 812-855-1021
Fax: 812-855-3736
Email:
Web page: http://www.indiana.edu/~econweb/
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Related research

Keywords: EMPLOYMENT ; WAGES ; SUBSIDIES;

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Cited by:
  1. 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.
  2. Robin Boadway, 2012. "Recent Advances in Optimal Income Taxation," Hacienda Pública Española, IEF, vol. 200(1), pages 15-39, March.
  3. 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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