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The Effects Of Taxes On Labour In A Dynamic Efficiency Wage Model

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  • JOÃO RICARDO FARIA

Abstract

This paper studies the impact of wage and employment taxes in an intertemporal efficiency wage model. Cases with fixed, linear and quadratic adjustment costs associated with job creation are considered. In general, the model shows that an increase in the employment tax leads to an increase in unemployment, reducing job creation, and has ambiguous effect on wages; whereas an increase in the wage tax reduces wages and has ambiguous impact on unemployment and job creation.

Suggested Citation

  • João Ricardo Faria, 2004. "The Effects Of Taxes On Labour In A Dynamic Efficiency Wage Model," The Japanese Economic Review, Japanese Economic Association, vol. 55(3), pages 286-297, September.
    • Handle: RePEc:bla:jecrev:v:55:y:2004:i:3:p:286-297
    DOI: 10.1111/j.1468-5876.2004.00278.x
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    References listed on IDEAS

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    Cited by:

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    2. Goerke, Laszlo, 2020. "An Efficiency-Wage Model with Habit Concerns about Wages," IZA Discussion Papers 13454, Institute of Labor Economics (IZA).

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