Does the wage tax system cause budget deficits? A macro-economic experiment
AbstractIn this paper we investigate experimentally the economic functioning of a wage tax system for financing unemployment benefits in an international economy, in particular in reaction to budget deficits and tax adjustment. Our results support the hypothesis that due to out-of-equilibrium price uncertainty producers are reluctant to employ inputs. We also observe a downward pressure on wages exacerbated by an over-supply of labor by consumers. These observations can explain the budget deficits found. Furthermore, we find that tax adjustments in order to facilitate a balancing of the budget has strong adverse effects on unemployment and real GDP. Copyright 2001 by Kluwer Academic Publishers
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Bibliographic InfoPaper provided by Maastricht University in its series Open Access publications from Maastricht University with number urn:nbn:nl:ui:27-16455.
Date of creation: 2001
Date of revision:
Publication status: Published in Public choice (2001) v.109, p.371-394
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Other versions of this item:
- Riedl, Arno & van Winden, Frans, 2001. " Does the Wage Tax System Cause Budget Deficits? A Macro-economic Experiment," Public Choice, Springer, vol. 109(3-4), pages 371-94, December.
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