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Layoff taxes and minimum wage: Two complementary public policies

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  • Gavrel, Frédéric
  • Lebon, Isabelle
  • Rebière, Thérèse

Abstract

In a matching model in which the job destruction rate and the output are endogenous, we show that the presence of a binding minimum wage prompts firms to choose too risky jobs. Introducing layoff taxes therefore reduces unemployment and improves market efficiency.

Suggested Citation

  • Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2010. "Layoff taxes and minimum wage: Two complementary public policies," Economics Letters, Elsevier, vol. 107(1), pages 30-32, April.
  • Handle: RePEc:eee:ecolet:v:107:y:2010:i:1:p:30-32
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    References listed on IDEAS

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    1. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, January.
    2. Mortensen, Dale & Pissarides, Christopher, 2011. "Job Creation and Job Destruction in the Theory of Unemployment," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 1, pages 1-19.
    3. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, March.
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    5. Wang, Cheng & Williamson, Stephen D., 2002. "Moral hazard, optimal unemployment insurance, and experience rating," Journal of Monetary Economics, Elsevier, pages 1337-1371.
    6. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
    7. repec:adr:anecst:y:2008:i:89:p:04 is not listed on IDEAS
    8. Wattanakuljarus, Anan & Coxhead, Ian, 2008. "Is tourism-based development good for the poor?: A general equilibrium analysis for Thailand," Journal of Policy Modeling, Elsevier, vol. 30(6), pages 929-955.
    9. Thaiprasert, Nalitra, 2006. "Rethinking the Role of Agriculture and Agro-Industry in the Economic Development of Thailand: Input-Output and CGE Analyses (Ph.D. Dissertation)," MPRA Paper 1089, University Library of Munich, Germany.
    10. Hanson, Kenneth & Golan, Elise H. & Vogel, Stephen J. & Olmsted, Jennifer, 2002. "Tracing The Impacts Of Food Assistance Programs On Agriculture And Consumers: A Computable General Equilibrium Model," Food Assistance and Nutrition Research Reports 33831, United States Department of Agriculture, Economic Research Service.
    11. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 279-298.
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    Cited by:

    1. Wang, Cheng & Williamson, Stephen D., 2002. "Moral hazard, optimal unemployment insurance, and experience rating," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1337-1371, October.

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