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Three Theorems on Inflation Taxes and Marginal Employment Subsidies

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  • Oswald, Andrew J

Abstract

The paper studies the micro-economics of inflation taxes and marginal employment subsidies. It proves under very weak assumptions (i) an inflation tax will reduce the long-run equilibrium wage or price and (ii) that a marginal employment subsidy will raise the long-run equilibrium employment level. The theorems are illustrated with examples. The paper also proves (iii) that in special circumstances a tax on inflation is exactly equilivalent to a marginal employment subsidy.
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  • Oswald, Andrew J, 1984. "Three Theorems on Inflation Taxes and Marginal Employment Subsidies," Economic Journal, Royal Economic Society, vol. 94(375), pages 599-611, September.
    • Handle: RePEc:ecj:econjl:v:94:y:1984:i:375:p:599-611
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    1. Layard, Richard, 1982. "Is Incomes Policy the Answer to Unemployment?," Economica, London School of Economics and Political Science, vol. 49(195), pages 219-239, August.
    2. Isard, Peter, 1973. "The Effectiveness of Using the Tax System to Curb Inflationary Collective Bargains: An Analysis of the Wallich-Weintraub Plan," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 729-740, May-June.
    3. Oswald, Andrew J., 1982. "Optimal Intervention in an Economy with Trade Unions," Economic Research Papers 269164, University of Warwick - Department of Economics.
    4. Nichols, Donald A, 1979. "Comparing TIP to Wage Subsidies," American Economic Review, American Economic Association, vol. 69(2), pages 207-211, May.
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    6. Kotowitz, Yehuda & Portes, Richard, 1974. "The `tax on wage increases' : A theoretical analysis," Journal of Public Economics, Elsevier, vol. 3(2), pages 113-132, May.
    7. Seidman, Laurence S, 1979. "The Role of a Tax-Based Incomes Policy," American Economic Review, American Economic Association, vol. 69(2), pages 202-206, May.
    8. R. Jackman & R. Layard, 1982. "An inflation tax," Fiscal Studies, Institute for Fiscal Studies, vol. 3(2), pages 47-59, July.
    9. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
    10. Latham, R. W. & Peel, D. A., 1977. "The `tax on wage increses' when the firm is a monopsonist," Journal of Public Economics, Elsevier, vol. 8(2), pages 247-253, October.
    11. Layard, P R G & Nickell, S J, 1980. "The Case for Subsidising Extra Jobs," Economic Journal, Royal Economic Society, vol. 90(357), pages 51-73, March.
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    Cited by:

    1. Mary C. Daly & Daniel J. Wilson, 2006. "Keeping up with the Joneses and staying ahead of the Smiths: evidence from suicide data," Working Paper Series 2006-12, Federal Reserve Bank of San Francisco.
    2. Andreas Knabe & Ronnie Schöb & Joachim Weimann, 2006. "Marginal Employment Subsidization: A New Concept and a Reappraisal," Kyklos, Wiley Blackwell, vol. 59(4), pages 557-577, November.
    3. Andreas Knabe & Ronnie Schöb, 2013. "Subsidizing extra jobs: promoting employment by taming the unions," Oxford Economic Papers, Oxford University Press, vol. 65(4), pages 807-831, October.
    4. Alain de Crombrugghe & Gregory de Walque, 2011. "Wage and employment effects of a wage norm : The Polish transition experience," Working Paper Research 209, National Bank of Belgium.
    5. Kenneth Koford, 1987. "Some Short-Run Microeconomic Effects of a Market Incentive Anti-Inflation Plan," Public Finance Review, , vol. 15(2), pages 199-218, April.
    6. Schöb, Ronnie, 2007. "Soziale Grundsicherung und Beschäftigung," Discussion Papers 2007/12, Free University Berlin, School of Business & Economics.
    7. Bijie Ren, 2008. "The regional effects of marginal wage subsidies," Psychometrika, Springer;The Psychometric Society, vol. 3(4), pages 598-626, December.

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