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Fiscal policies and the prices of labor: a comparison of the U.K. and U.S

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  • Casey Mulligan

Abstract

This paper measures the 2007–13 evolution of employment tax rates in the U.K. and the U.S. The U.S. changes are greater, in the direction of taxing a greater fraction of the value created by employment, and primarily achieved with new implicit tax rates. Even though both countries implemented a temporary “fiscal stimulus,” their tax rate dynamics were different: the U.S. stimulus increased rates, whereas the U.K. stimulus reduced them. The U.K. later increased the tax on employment during its “austerity” period. Tax rate measurements are a first ingredient for cross-country comparisons of labor markets during and after the financial crisis. Copyright Mulligan. 2015

Suggested Citation

  • Casey Mulligan, 2015. "Fiscal policies and the prices of labor: a comparison of the U.K. and U.S," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-27, December.
    • Handle: RePEc:spr:izalpo:v:4:y:2015:i:1:p:1-27:10.1186/s40173-015-0049-2
    DOI: 10.1186/s40173-015-0049-2
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    References listed on IDEAS

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    1. Gomes, Pedro, 2012. "Labour market flows: Facts from the United Kingdom," Labour Economics, Elsevier, vol. 19(2), pages 165-175.
    2. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 297-323, December.
    3. Herwig Immervoll & Henrik Jacobsen Kleven & Claus Thustrup Kreiner & Emmanuel Saez, 2007. "Welfare reform in European countries: a microsimulation analysis," Economic Journal, Royal Economic Society, vol. 117(516), pages 1-44, January.
    4. Keen, Michael & Mintz, Jack, 2004. "The optimal threshold for a value-added tax," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 559-576, March.
    5. Onji, Kazuki, 2009. "The response of firms to eligibility thresholds: Evidence from the Japanese value-added tax," Journal of Public Economics, Elsevier, vol. 93(5-6), pages 766-775, June.
    6. Casey B. Mulligan, 2013. "Recent Marginal Labor Income Tax Rate Changes by Skill and Marital Status," Tax Policy and the Economy, University of Chicago Press, vol. 27(1), pages 69-100.
    7. Casey B. Mulligan, 2015. "The New Full-Time Employment Taxes," Tax Policy and the Economy, University of Chicago Press, vol. 29(1), pages 89-132.
    8. Stuart Adam & James Browne, 2013. "Do the UK Government’s welfare reforms make work pay," IFS Working Papers W13/26, Institute for Fiscal Studies.
    9. Casey B. Mulligan, 2015. "The New Employment And Income Taxes," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 34(2), pages 466-473, March.
    10. Mike Brewer & James Browne & Andrew Hood & Robert Joyce & Luke Sibieta, 2013. "The Short‐ and Medium‐Term Impacts of the Recession on the UK Income Distribution," Fiscal Studies, Institute for Fiscal Studies, vol. 34(2), pages 179-201, June.
    11. Stuart Adam, 2005. "Measuring the marginal efficiency cost of redistribution in the UK," IFS Working Papers W05/14, Institute for Fiscal Studies.
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    Cited by:

    1. Clymo, AJ, 2017. "Heterogeneous Firms, Wages, and the Effects of Financial Crises," Economics Discussion Papers 20572, University of Essex, Department of Economics.

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    More about this item

    Keywords

    E24; H31; I38; J22; Marginal tax rates; Employment; International comparisons;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • I38 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Government Programs; Provision and Effects of Welfare Programs

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