Indivisible Labor and Its Supply Elasticity: Do Taxes Explain European Employment?
AbstractWe first scrutinize and challenge Prescott's (2002, 2004) quantitative analysis of the role of differences in taxes in explaining cross-country differences in labor market outcomes, and then defend an alternative model that assigns an important role to cross-country differences in social unemployment insurance institutions that Prescott argues can be safely ignored. In the process, we explore how the assumption of indivisible labor interacts with assumptions regarding the (in)completeness of financial markets and any frictions in the labor market, to determine the labor supply elasticity.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2006 Meeting Papers with number 734.
Date of creation: 03 Dec 2006
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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Employment lotteries; indivisible labor; labor supply elasticity; taxation; unemployment; unemployment insurance;
Find related papers by JEL classification:
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-01-13 (All new papers)
- NEP-DGE-2007-01-13 (Dynamic General Equilibrium)
- NEP-EEC-2007-01-13 (European Economics)
- NEP-IAS-2007-01-13 (Insurance Economics)
- NEP-MAC-2007-01-13 (Macroeconomics)
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