IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

A Quantitative Evaluation of Payroll Tax Subsidies For Low-Wage Workers: An Equilibrium Search Approach

  • Arnaud Chéron

    (GAINS - UM - Université du Maine)

  • Jean-Olivier Hairault

    ()

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics)

  • François Langot

    (PSE - Paris-Jourdan Sciences Economiques - CNRS - Centre National de la Recherche Scientifique - EHESS - École des hautes études en sciences sociales - ENS Paris - École normale supérieure - Paris - École des Ponts ParisTech (ENPC))

Phelps (1994) presented the case for a low-wage subsidy policy. Since the mid-1990s, France has experimented with this strategy. This paper evaluates the e®ect of this policy on employment and also on output and welfare. We construct an equilibrium search model incorporating wage posting and specific human capital investment, where unemployment and the distribution of both wages and productivity are endogenous. We estimate this model using French data. Numerical simulations show that the prevailing minimum wage allows a high production level to be reached by increasing training investment, even though the optimal minimum wage is lower. We show that payroll tax subsidies enhance welfare more than a reduction in the minimum wage when they are spread over a large range of wages in order to avoid specialization in low productivity jobs.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://halshs.archives-ouvertes.fr/halshs-00270295/document
Download Restriction: no

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00270295.

as
in new window

Length:
Date of creation: 2008
Date of revision:
Publication status: Published in Journal of Public Economics, Elsevier, 2008, 92 (3-4), pp.817-843. <10.1016/j.jpubeco.2007.09.012>
Handle: RePEc:hal:cesptp:halshs-00270295
DOI: 10.1016/j.jpubeco.2007.09.012
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00270295
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Berg, G.J. & Ridder, G., 1993. "An empirical equilibrium search model of the labour market," Serie Research Memoranda 0039, VU University Amsterdam, Faculty of Economics, Business Administration and Econometrics.
  2. David G. Blanchflower & Lisa M. Lynch, 1992. "Training at Work: A Comparison of U.S. and British Youths," NBER Working Papers 4037, National Bureau of Economic Research, Inc.
  3. DiNardo, John & Fortin, Nicole M & Lemieux, Thomas, 1996. "Labor Market Institutions and the Distribution of Wages, 1973-1992: A Semiparametric Approach," Econometrica, Econometric Society, vol. 64(5), pages 1001-44, September.
  4. Bent Jesper Christensen & Rasmus Lentz & Dale T. Mortensen & George R. Neumann & Axel Werwatz, 2003. "On the Job Search and the Wage Distribution," CAM Working Papers 2004-09, University of Copenhagen. Department of Economics. Centre for Applied Microeconometrics.
  5. Christopher Flinn & James Mabli, 2008. "On-the-Job Search, Minimum Wages, and Labor Market Outcomes in an Equilibrium Bargaining Framework," Carlo Alberto Notebooks 91, Collegio Carlo Alberto.
  6. Cahuc, Pierre & Postel-Vinay, Fabien & Robin, Jean-Marc, 2003. "Wage Bargaining with On-The-Job Search: Theory and Evidence," CEPR Discussion Papers 4154, C.E.P.R. Discussion Papers.
  7. Phelps, Edmund S, 1994. "Low-Wage Employment Subsidies versus the Welfare State," American Economic Review, American Economic Association, vol. 84(2), pages 54-58, May.
  8. Bowlus, Audra J & Kiefer, Nicholas M & Neumann, George R, 2001. "Equilibrium Search Models and the Transition from School to Work," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(2), pages 317-43, May.
  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. Black, Sandra E & Lynch, Lisa M, 1996. "Human-Capital Investments and Productivity," American Economic Review, American Economic Association, vol. 86(2), pages 263-67, May.
  11. repec:adr:anecst:y:2002:i:67-68:p:11 is not listed on IDEAS
  12. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-73, May.
  13. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "Equilibrium wage dispersion with worker and employer heterogeneity," Sciences Po publications info:hdl:2441/dc0ckec3fcb, Sciences Po.
  14. Attanasio, Orazio P, et al, 1999. "Humps and Bumps in Lifetime Consumption," Journal of Business & Economic Statistics, American Statistical Association, vol. 17(1), pages 22-35, January.
  15. Elena Quercioli, 2005. "Training, Turnover, And Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 46(1), pages 133-143, 02.
  16. Gourieroux, C & Monfort, A & Renault, E, 1993. "Indirect Inference," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 8(S), pages S85-118, Suppl. De.
  17. Fabrice Collard & Patrick Fève & François Langot & Corinne Perraudin, 2002. "A structural model of US aggregate job flows," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 17(3), pages 197-223.
  18. Pischke, J-S, 1996. "Continuous Training in Germany," Working papers 96-28, Massachusetts Institute of Technology (MIT), Department of Economics.
  19. Shimer, Robert, 2006. "On-the-job search and strategic bargaining," European Economic Review, Elsevier, vol. 50(4), pages 811-830, May.
  20. Pierre Cahuc & Fabien Postel-Vinay & Jean-Marc Robin, 2006. "Wage Bargaining with On-the-Job Search: Theory and Evidence," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00176090, HAL.
  21. Fabien Postel-Vinay & Jean-Marc Robin, 2002. "To Match or Not To Match ? Optimal Wage Policy with Endogenous Worker search Intensity," Working Papers 2002-59, Centre de Recherche en Economie et Statistique.
  22. Rosholm, Michael & Svarer, Michael, 2004. "Endogenous wage dispersion in a search-matching model," Labour Economics, Elsevier, vol. 11(5), pages 623-645, October.
  23. Eckstein, Zvi & Wolpin, Kenneth I, 1990. "Estimating a Market Equilibrium Search Model from Panel Data on Individuals," Econometrica, Econometric Society, vol. 58(4), pages 783-808, July.
  24. Albrecht, James W & Axell, Bo, 1983. "An Equilibrium Model of Search Unemployment," Working Paper Series 99, Research Institute of Industrial Economics.
  25. John M. Abowd & Francis Kramarz, 1997. "The Costs of Hiring and Separations," NBER Working Papers 6110, National Bureau of Economic Research, Inc.
  26. James Albrecht & Susan Vroman, 2005. "Equilibrium Search With Time-Varying Unemployment Benefits," Economic Journal, Royal Economic Society, vol. 115(505), pages 631-648, 07.
  27. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  28. Daniel Cohen & Arnaud Lefranc & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 265-292, October.
  29. Guy Laroque & Bernard Salanié, 2000. "Une décomposition du non-emploi en France," Économie et Statistique, Programme National Persée, vol. 331(1), pages 47-66.
  30. Christopher J. Flinn, 2006. "Minimum Wage Effects on Labor Market Outcomes under Search, Matching, and Endogenous Contact Rates," Econometrica, Econometric Society, vol. 74(4), pages 1013-1062, 07.
  31. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, vol. 110(462), pages C1-33, March.
  32. Lynch, Lisa M, 1992. "Private-Sector Training and the Earnings of Young Workers," American Economic Review, American Economic Association, vol. 82(1), pages 299-312, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:hal:cesptp:halshs-00270295. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.