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Complementarity Between Low- and High-Skilled Workers and the Employment Impact of Tax versus Human Capital Policies

Author

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  • Clément Carbonnier

    (UCP - Université de Cergy Pontoise - Université Paris-Seine)

Abstract

The present paper analyses theoretically the impact of substitutability and complementarity between labour market segments on the efficiency of policies tackling low-skilled unemployment. Based on a search and matching model with multiple segments interacting through the production function, it is shown that the efficiency of cost policies-decreasing payroll taxes on low-skill segments-increases with the segments' substitutability. Reducing the relative cost of low-skill labour-through tax wedge decrease-induces labour demand increase if low-skill labour is substitute to other production factors. The efficiency of productivity policies-upgrading workers from lower to higher-skill segments-increases with their complementarity. Enhancing human capital allows increasing production-constrained by the scarcity of high-skill labour-hence increases low-skill labour demand if factors are complements. Consequently, variations of the efficiency of both policies may derive from the technological change, modifying the complementarity between segments.

Suggested Citation

  • Clément Carbonnier, 2020. "Complementarity Between Low- and High-Skilled Workers and the Employment Impact of Tax versus Human Capital Policies," Post-Print hal-04269513, HAL.
    • Handle: RePEc:hal:journl:hal-04269513
    DOI: 10.15609/annaeconstat2009.138.0049
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    Cited by:

    1. Clément Carbonnier, 2023. "Welfare Economics and Neoliberalism: Interpreting the ideal type of perfect competition general equilibrium," Working Papers hal-04062786, HAL.

    More about this item

    Keywords

    H32 D78 J64 Unemployment Policies Labor Taxation Workforce Skills; H32; D78; J64 Unemployment Policies; Labor Taxation; Workforce Skills;
    All these keywords.

    JEL classification:

    • H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
    • D78 - Microeconomics - - Analysis of Collective Decision-Making - - - Positive Analysis of Policy Formulation and Implementation
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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