Employment- and Growth Effects of Tax Reforms
AbstractThis paper explores how revenue-neutral tax reforms impact employment and economic growth in a model of endogenous growth and search frictions on the labor market. We analyze how savings and the incentive to create new jobs are affected by tax swaps between wage income taxes, payroll taxes, capital income taxes and taxes levied on capital costs. In our framework, the payroll tax is found to be neutral. If this tax is used to finance a cut in the capital income tax, we will observe an increase in both growth and, via the capitalization effect, employment. Most other tax reforms, however, imply a trade-off between employment and growth
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Bibliographic InfoPaper provided by University of Kassel, Institute of Economics in its series Discussion Papers in Economics with number 58/04.
Length: 21 pages
Date of creation: Jun 2004
Date of revision:
Publication status: Published in Economic Modelling, Vol. 23 (2006), S. 909-925.
search unemployment; growth; tax reform;
Find related papers by JEL classification:
- E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies
- O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
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