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Reducing Social Contributions for Unskilled Labor as a Way of Fighting Unemployment: An Empirical Evaluation for the Case of Spain

  • Oscar Bajo-Rubio
  • Antonio G. Gómez-Plana

We provide an empirical evaluation of the effects of a cut in social security contributions (i) for all types of labor and (ii) only for unskilled labor, within a computable generalequilibrium model simulation of the Spanish economy. The model allows firms to follow a noncompetitive price rule, and incorporates an equal-yield assumption, which means that the reduction in social security contributions is compensated with an increase in value-added tax rates, so the public-sector deficit is not affected. In addition, the labor market is assumed to follow a matching unemployment rule, which allows us to model in a simple way any frictions present in that market.

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Article provided by Mohr Siebeck, Tübingen in its journal FinanzArchiv.

Volume (Year): 60 (2004)
Issue (Month): 2 (August)
Pages: 160-

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Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200408)60:2_160:rscful_2.0.tx_2-3
Contact details of provider: Web page: http://www.mohr.de/fa

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  1. Balistreri, Edward J., 2002. "Operationalizing equilibrium unemployment: A general equilibrium external economies approach," Journal of Economic Dynamics and Control, Elsevier, vol. 26(3), pages 347-374, March.
  2. Stephen Nickell & Brian Bell, 1996. "Would cutting payroll taxes on the unskilled have a significant effect on unemployment?," LSE Research Online Documents on Economics 20687, London School of Economics and Political Science, LSE Library.
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  12. Rutherford, Thomas F, 1999. "Applied General Equilibrium Modeling with MPSGE as a GAMS Subsystem: An Overview of the Modeling Framework and Syntax," Computational Economics, Society for Computational Economics, vol. 14(1-2), pages 1-46, October.
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