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Employment- and Growth Effects of Tax Reforms

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Author Info
Jochen Michaelis () (Department of Economics, University of Kassel)
Angela Birk () (HWWA, University of Hamburg, Havard University, Department of Economics)

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Abstract

This 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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Publisher Info
Paper provided by University of Kassel, Institute of Economics in its series Discussion Papers in Economics with number 58/04.

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Length: 21 pages
Date of creation: Jun 2004
Date of revision:
Publication status: Published in Economic Modelling, Vol. 23 (2006), S. 909-925.
Handle: RePEc:kas:wpaper:2004-58

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Related research
Keywords: search unemployment; growth; tax reform;

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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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  3. Jochen Michaelis & Angela Birk, 2004. "Employment- and Growth Effects of Tax Reforms," Discussion Papers in Economics 58/04, University of Kassel, Institute of Economics. [Downloadable!]
    Other versions:
  4. Goerke, L., 1996. "Taxes on Payroll, Revenues and Profits in Three Models of Collective Bargaining," Discussion Paper Series In Economics And Econometrics 9603, Economics Division, School of Social Sciences, University of Southampton.
    Other versions:
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    Other versions:
  15. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CES, MSH, vol. 15(30), pages 47-104, 04. [Downloadable!] (restricted)
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  16. Bovenberg, A Lans & van der Ploeg, Frederick, 1998. " Tax Reform, Structural Unemployment and the Environment," Scandinavian Journal of Economics, Blackwell Publishing, vol. 100(3), pages 593-610, September. [Downloadable!] (restricted)
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  20. Barbara Petrongolo & Christopher A. Pissarides, 2001. "Looking into the Black Box: A Survey of the Matching Function," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 390-431, June. [Downloadable!] (restricted)
    Other versions:
  21. Kim, Se-Jik, 1998. "Growth effect of taxes in an endogenous growth model: to what extent do taxes affect economic growth?," Journal of Economic Dynamics and Control, Elsevier, vol. 23(1), pages 125-158, September. [Downloadable!] (restricted)
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    Other versions:
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Reinhold Kosfeld & Hans-Friedrich Eckey & Jorgen Lauridsen, 2007. "Disparities in Prices and Income Across German NUTS 3 Regions," Discussion Papers in Economics 93/07, University of Kassel, Institute of Economics. [Downloadable!]
    Other versions:
  2. Jochen Michaelis, 2007. "Internationaler Handel," Discussion Papers in Economics 91/07, University of Kassel, Institute of Economics. [Downloadable!]
  3. Jochen Michaelis & Alexander Spermann, 2009. "Geringqualifizierte Arbeit, Marktlöhne und Sozialpolitik: Konzepte für Deutschland," MAGKS Papers on Economics 200920, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
  4. Angela Birk & Jochen Michaelis, 2004. "Employment- and Growth Effects of Tax Reforms," cege – Center for European, Governance and Economic Development Research Discussion Papers 29, cege – Center for European, Governance and Economic Development Research, University of Goettingen (Germany).. [Downloadable!]
    Other versions:
  5. Hans-Friedrich Eckey & Matthias Türck, 2006. "Convergence of EU-Regions. A Literature Report," Discussion Papers in Economics 80/06, University of Kassel, Institute of Economics. [Downloadable!]
  6. Hans-Friedrich Eckey & Reinhold Kosfeld & Matthias Türck, 2007. "Anmerkung zur Identifikation von Förderregionen in der "Gemeinschaftsaufgabe"," Discussion Papers in Economics 90/07, University of Kassel, Institute of Economics. [Downloadable!]
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