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Fiscal Policies and the Prices of Labor: A Comparison of the U.K. and U.S

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  • Casey B. Mulligan

Abstract

This paper measures the 2007-13 evolution of employment tax rates in the U.K. and the U.S., especially as they are influenced by changes in tax and safety net benefit rules. The magnitudes of the U.S. changes are greater, in the direction of taxing a greater fraction of the value created by employment, and primarily achieved with changes in implicit tax rates. Even though both countries implemented temporary “fiscal stimulus,” their tax rate dynamics were different: the U.S. stimulus increased rates whereas the U.K. stimulus reduced them. The U.K. later increased the tax on employment during its so-called “austerity” period. Employer-cost dynamics are also different in the two countries. The tax rates calculated in this paper are a first ingredient for cross-country comparisons of labor market and fiscal policy dynamics during and after the financial crisis.

Suggested Citation

  • Casey B. Mulligan, 2015. "Fiscal Policies and the Prices of Labor: A Comparison of the U.K. and U.S," NBER Working Papers 21358, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:21358
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    References listed on IDEAS

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    1. Gomes, Pedro, 2012. "Labour market flows: Facts from the United Kingdom," Labour Economics, Elsevier, vol. 19(2), pages 165-175.
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    5. Casey B. Mulligan, 2013. "Recent Marginal Labor Income Tax Rate Changes by Skill and Marital Status," Tax Policy and the Economy, University of Chicago Press, vol. 27(1), pages 69-100.
    6. Casey B. Mulligan, 2015. "The New Employment And Income Taxes," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 34(2), pages 466-473, March.
    7. Mike Brewer & James Browne & Andrew Hood & Robert Joyce & Luke Sibieta, 2013. "The Short‐ and Medium‐Term Impacts of the Recession on the UK Income Distribution," Fiscal Studies, Institute for Fiscal Studies, vol. 34(2), pages 179-201, June.
    8. Stuart Adam, 2005. "Measuring the marginal efficiency cost of redistribution in the UK," IFS Working Papers W05/14, Institute for Fiscal Studies.
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    10. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
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    Cited by:

    1. Clymo, AJ, 2017. "Heterogeneous Firms, Wages, and the Effects of Financial Crises," Economics Discussion Papers 20572, University of Essex, Department of Economics.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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