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Impact of Selective Reductions in Labor Taxation

  • Olivier, PIERARD

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

To study the impacts of reductions in employer’s social security contributions, we construct an intertemporal general equilibrium model with different types of workers (and wages), search unemployment and endogenous job destruction rates. Our model reproduces the empirical evidence that the impacts on employment, of reductions in contributions at the minimum wage level, go through a decrease in job destructions rather than an increase in job creations. We moreover find that, although it is prejudical to average productivity, reductions targeted at the minimum wage create much more net employment than reductions targeted at other wages.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004035.

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Date of creation: 01 Oct 2004
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Handle: RePEc:ctl:louvir:2004035
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  1. Andolfatto, David, 1996. "Business Cycles and Labor-Market Search," American Economic Review, American Economic Association, vol. 86(1), pages 112-32, March.
  2. Garibaldi, Pietro & Wasmer, Etienne, 2001. "Labor Market Flows and Equilibrium Search Unemployment," IZA Discussion Papers 406, Institute for the Study of Labor (IZA).
  3. Holmlund, B., 1997. "Unemployment Insurance in Theory and Practice," CEPR Discussion Papers 380, Centre for Economic Policy Research, Research School of Economics, Australian National University.
  4. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  5. Joseph, G. & Pierrard, O. & Sneessens, H. R., 2004. "Job turnover, unemployment and labor market institutions," Labour Economics, Elsevier, vol. 11(4), pages 451-468, August.
  6. Cockx, Bart & Dejemeppe, Muriel, 2002. "Do the Higher Educated Unemployed Crowd Out the Lower Educated Ones in a Competition for Jobs?," IZA Discussion Papers 541, Institute for the Study of Labor (IZA).
  7. Manacorda, Marco & Petrongolo, Barbara, 1999. "Skill Mismatch and Unemployment in OECD Countries," Economica, London School of Economics and Political Science, vol. 66(262), pages 181-207, May.
  8. Hartog, Joop, 2000. "Over-education and earnings: where are we, where should we go?," Economics of Education Review, Elsevier, vol. 19(2), pages 131-147, April.
  9. Francis Kramarz & Thomas Philippon, 2000. "The Impact of Differenctial Payroll Tax Subsidies on Minimum Wage Employment," Working Papers 2000-10, Centre de Recherche en Economie et Statistique.
  10. Garibaldi, Pietro, 1998. "Job flow dynamics and firing restrictions," European Economic Review, Elsevier, vol. 42(2), pages 245-275, February.
  11. Francis Kramarz & Thomas Philippon, 2000. "The Impact of Differenctial Payroll Tax Subsidies on Minimum Wage Employment," Working Papers 2000-10, Centre de Recherche en Economie et Statistique.
  12. Engström, Per & Holmlund, Bertil & Kolm, Ann-Sofie, 2001. "Optimal Taxation in Search Equilibrium with Home Production," Working Paper Series 2001:19, Uppsala University, Department of Economics.
  13. Merz, Monika, 1995. "Search in the labor market and the real business cycle," Journal of Monetary Economics, Elsevier, vol. 36(2), pages 269-300, November.
  14. Pierre Cahuc, 2003. "Baisser les charges sociales, jusqu'où et comment ?," Revue Française d'Économie, Programme National Persée, vol. 17(3), pages 3-54.
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