Should we tax overtime, subsidize the wage or subsidize employment?
AbstractThis paper compares the macroeconomic implications of taxing overtime and using two kinds of subsidies, an employment and a wage subsidy, in a model where team work and commuting costs subject to congestion are key determinants of the choice of the workweek. To obtain reliable estimates, I calibrate the model to the substitutability between the workweek and employment using business cycle information. I find that subsidizing employment can achieve the same employment increase than taxing overtime but at a lower cost in terms of output, productivity, wages and welfare. The wage subsidy that achieves the same employment increase turns out to be very costly from a fiscal point of view, 12.7% of output versus 4.57% of output in the employment subsidy experiment.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Universidad Pablo de Olavide, Department of Economics in its series Working Papers with number 09.03.
Length: 29 pages
Date of creation: Feb 2009
Date of revision:
Overtime taxation; Subsidies; Workweek; Team Work; Commuting costs.;
Find related papers by JEL classification:
- E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
- H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
- J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-02-22 (All new papers)
- NEP-DGE-2009-02-22 (Dynamic General Equilibrium)
- NEP-LAB-2009-02-22 (Labour Economics)
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.:
- Mark Bils & Jang-Ok Cho, 1993.
"Cyclical factor utilization,"
Discussion Paper / Institute for Empirical Macroeconomics
79, Federal Reserve Bank of Minneapolis.
- Cho, J-O. & Cooley, T.F., 1988.
"Employment And Hours Over The Business Cycle,"
88-03, Rochester, Business - General.
- Gabriele, CARDULLO & Bruno, VANDERLINDEN, 2006.
"Employment subsidies and substitutable skills : An equilibrium matching approach,"
Discussion Papers (ECON - DÃ©partement des Sciences Economiques)
2006010, Université catholique de Louvain, Département des Sciences Economiques.
- Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
- Cardullo, Gabriele & Van der Linden, Bruno, 2006. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," IZA Discussion Papers 2073, Institute for the Study of Labor (IZA).
- Victoria Osuna & Jose-Victor Rios-Rull, 2003.
"Implementing the 35 Hour Workweek by Means of Overtime Taxation,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 179-206, January.
- Victoria Osuna Padilla & José-Víctor Ríos-Rull, 2002. "Implementing the 35 Hour Workweek by Means of Overtime Taxation," Economic Working Papers at Centro de Estudios Andaluces E2002/04, Centro de Estudios Andaluces.
- Cho, Jang-Ok & Rogerson, Richard, 1988. "Family labor supply and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 233-245.
- Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993.
"Labor Hoarding and the Business Cycle,"
Journal of Political Economy,
University of Chicago Press, vol. 101(2), pages 245-73, April.
- Marimon, Ramon & Zilibotti, Fabrizio, 2000.
"Employment and distributional effects of restricting working time,"
European Economic Review,
Elsevier, vol. 44(7), pages 1291-1326, June.
- Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Employment and Distributional Effects of Restricting Working Time," CEPR Discussion Papers 2127, C.E.P.R. Discussion Papers.
- Marimon, R. & Zilibotti, F., 1999. "Employment and Distributional Effects of Restricting Working Time," Economics Working Papers eco99/19, European University Institute.
- Hansen, Gary D., 1985.
"Indivisible labor and the business cycle,"
Journal of Monetary Economics,
Elsevier, vol. 16(3), pages 309-327, November.
- Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- How to increase employment, and at what cost
by Economic Logician in Economic Logic on 2009-02-26 09:03:00
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rocío Fernández).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.