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Equilibrium Search And Tax Credit Reform

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  • Andrew Shephard

Abstract

An empirical equilibrium job search model with wage posting is developed to analyze the impact of U.K. tax reforms. The model allows for a rich characterization of the labor market, with hours responses, accurate representations of the tax and transfer system, and both worker and firm heterogeneity. The British Working Families' Tax Credit and contemporaneous reforms are predicted to increase employment, with equilibrium effects found to be relatively modest. The model is used to assess the impact of alternative policies, with equilibrium effects shown to become important as the generosity of tax credits is increased.

Suggested Citation

  • Andrew Shephard, 2017. "Equilibrium Search And Tax Credit Reform," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 58(4), pages 1047-1088, November.
  • Handle: RePEc:wly:iecrev:v:58:y:2017:i:4:p:1047-1088
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    File URL: https://doi.org/10.1111/iere.12245
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Christian Moser & Niklas Engbom, 2016. "Earnings Inequality and the Minimum Wage: Evidence from Brazil," 2016 Meeting Papers 72, Society for Economic Dynamics.
    2. Hanming Fang & Naoki Aizawa, 2012. "Equilibrium Labor Market Search and Health Insurance Reform," 2012 Meeting Papers 959, Society for Economic Dynamics.
    3. Ghazala Azmat, 2018. "Incidence, Salience and Spillovers: The Direct and Indirect Effects of Tax Credits on Wages," Sciences Po publications info:hdl:2441/cjhqfnej984, Sciences Po.
    4. repec:eee:eecrev:v:113:y:2019:i:c:p:108-135 is not listed on IDEAS
    5. Gürtzgen, Nicole & Blömer, Maximilian & Pohlan, Laura & Stichnoth, Holger & van den Berg, Gerard, 2016. "Estimating an Equilibrium Job Search Model for the German Labour Market," Annual Conference 2016 (Augsburg): Demographic Change 145950, Verein für Socialpolitik / German Economic Association.
    6. Benoit Schmutz & Modibo Sidibé, 2014. "Job Search and Migration in a System of Cities," Working Papers 2014-43, Center for Research in Economics and Statistics.

    More about this item

    JEL classification:

    • H29 - Public Economics - - Taxation, Subsidies, and Revenue - - - Other
    • J08 - Labor and Demographic Economics - - General - - - Labor Economics Policies
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General

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