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Value-added Tax versus Social Security Contributions / Mehrwertsteuer oder Sozialversicherungsabgaben

  • Goerke Laszlo

    ()

    (Universität Konstanz, Fakultät für Wirtschaftswissenschaften und Statistik, Fach D 138, D-78457 Konstanz)

In order to alleviate unemployment it is often recommended to reduce social security contributions (SSC) and to compensate for the ensuing loss in revenues by a rise in the value-added tax (VAT). Assuming unemployment to be caused by efficiency wages, it is shown that a balanced-budget shift from a payroll tax to a VAT will increase employment if the rise in the VAT does not alter consumer prices. If the effects of a shift from SSC to the VAT on the worker’s effort are neutralised, for example, by imposing a constant wedge, the employment impact will depend on the nature of the unemployment compensation system.

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File URL: http://www.degruyter.com/view/j/jbnst.1999.219.issue-3-4/jbnst-1999-3-406/jbnst-1999-3-406.xml?format=INT
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Article provided by De Gruyter in its journal Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik).

Volume (Year): 219 (1999)
Issue (Month): 3-4 (June)
Pages: 308-325

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Handle: RePEc:jns:jbstat:v:219:y:1999:i:3-4:p:308-325
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