IDEAS home Printed from https://ideas.repec.org/p/iza/izadps/dp71.html
   My bibliography  Save this paper

The Wedge

Author

Listed:
  • Goerke, Laszlo

    (IAAEU, University of Trier)

Abstract

It is often argued that the quantity which is traded on the market is independent of the side of the market which is taxed. However, this assertion need not hold, especially in imperfectly competitive markets like that for labour. Taking an efficiency wage economy as an example, it is shown that the legal incidence of social security contributions will affect the economic incidence if unemployment compensation is subject to social security contributions. Since this is the case in numerous OECD countries, the wedge between producer costs and the net wage might be an inappropriate device for measuring the impact of social security contributions on wages and employment.

Suggested Citation

  • Goerke, Laszlo, 1999. "The Wedge," IZA Discussion Papers 71, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp71
    as

    Download full text from publisher

    File URL: https://docs.iza.org/dp71.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Pisauro, Giuseppe, 1991. "The effect of taxes on labour in efficiency wage models," Journal of Public Economics, Elsevier, vol. 46(3), pages 329-345, December.
    2. Blinder, Alan S, 1988. "The Challenge of High Unemployment," American Economic Review, American Economic Association, vol. 78(2), pages 1-15, May.
    3. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    4. repec:bla:ecorec:v:68:y:1992:i:203:p:318-27 is not listed on IDEAS
    5. Goerke Laszlo, 1999. "Value-added Tax versus Social Security Contributions / Mehrwertsteuer oder Sozialversicherungsabgaben," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 219(3-4), pages 308-325, June.
    6. Pierre Picard & Eric Toulemonde, 2001. "On the Equivalence of Taxes Paid by Employers and Employees," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(4), pages 461-470, September.
    7. Kiander, Jaakko & Holm, Pasi & Koskela, Erkki, 1995. "Unions, Labour supply and Structure of Taxation: Equal Tax Bases," Discussion Papers 110, VATT Institute for Economic Research.
    8. Goerke, Laszlo, 1999. "Value-added Tax versus Social Security Contributions," IZA Discussion Papers 55, Institute of Labor Economics (IZA).
    9. James Pemberton, 1992. "Taxation and Wage Bargaining," The Economic Record, The Economic Society of Australia, vol. 68(4), pages 318-327, December.
    10. Koskela, Erkki & Schob, Ronnie, 1999. "Does the composition of wage and payroll taxes matter under Nash bargaining?," Economics Letters, Elsevier, vol. 64(3), pages 343-349, September.
    11. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    12. Michael Hoel, 1990. "Efficiency wages and income taxes," Journal of Economics, Springer, vol. 51(1), pages 89-99, February.
    13. Rasmussen, Bo Sandemann, 1998. "Long run effects of employment and payroll taxes in an efficiency wage model," Economics Letters, Elsevier, vol. 58(2), pages 245-253, February.
    14. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August.
    15. repec:bla:ausecp:v:38:y:1999:i:2:p:131-42 is not listed on IDEAS
    16. repec:bla:econom:v:53:y:1986:i:210(s):p:s1-22 is not listed on IDEAS
    17. Manning, Alan, 1990. "Imperfect Competition, Multiple Equilibria and Unemployment Policy," Economic Journal, Royal Economic Society, vol. 100(400), pages 151-162, Supplemen.
    18. Albrecht, James W. & Vroman, Susan B., 1996. "A note on the long-run properties of the shirking model," Labour Economics, Elsevier, vol. 3(2), pages 189-195, September.
    19. repec:bla:scotjp:v:48:y:2001:i:4:p:461-70 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Goerke, Laszlo, 1999. "Value-added Tax versus Social Security Contributions," IZA Discussion Papers 55, Institute of Labor Economics (IZA).
    2. Laszlo Goerke, 2003. "Tax Progressivity and Tax Evasion," CESifo Working Paper Series 1097, CESifo.
    3. Pierre M. Picard & Éric Toulemonde, 2001. "De quel côté du marché du travail prélever les impôts ?. Nouveaux éléments théoriques," Reflets et perspectives de la vie économique, De Boeck Université, vol. 0(1), pages 149-156.
    4. Goerke, Laszlo, 2001. "Tax Evasion in a Unionised Economy," IZA Discussion Papers 382, Institute of Labor Economics (IZA).
    5. João Ricardo Faria, 2004. "The Effects Of Taxes On Labour In A Dynamic Efficiency Wage Model," The Japanese Economic Review, Japanese Economic Association, vol. 55(3), pages 286-297, September.
    6. Van der Linden, Bruno, 1998. "Fighting unemployment without worsening povety: Basic income versus reductions of social security contributions," LIDAM Discussion Papers IRES 1999028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1999.
    7. Erkki Koskela & Ronnie Schöb, 2012. "Tax Progression under Collective Wage Bargaining and Individual Effort Determination," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(3), pages 749-771, July.
    8. Goerke, Laszlo, 2000. "Employment Effects of Labour Taxation in an Efficiency Wage Model with Alternative Budget Constraints and Time Horizons," IZA Discussion Papers 148, Institute of Labor Economics (IZA).
    9. Goerke, Laszlo, 1998. "Bismarck versus Beveridge: Flat- and earnings-related unemployment insurance in an efficiency wage framework," Discussion Papers, Series I 291, University of Konstanz, Department of Economics.
    10. García, José Ramón & Sala, Hector, 2008. "The tax system incidence on unemployment: A country-specific analysis for the OECD economies," Economic Modelling, Elsevier, vol. 25(6), pages 1232-1245, November.
    11. Riedl, Arno & Tyran, Jean-Robert, 2005. "Tax liability side equivalence in gift-exchange labor markets," Journal of Public Economics, Elsevier, vol. 89(11-12), pages 2369-2382, December.
    12. Laszlo Goerke, 2006. "Earnings‐related Severance Pay," LABOUR, CEIS, vol. 20(4), pages 651-672, December.
    13. Goerke, Laszlo, 2000. "On the structure of unemployment benefits in shirking models," Labour Economics, Elsevier, vol. 7(3), pages 283-295, May.
    14. Tomas Kögel, 2005. "On Substituting Consumption Taxes for Unemployment Insurance Contributions to Reduce Unemployment," Discussion Paper Series 2005_11, Department of Economics, Loughborough University, revised Sep 2005.
    15. Mathias, HUNGERBUEHLER, 2004. "Tax Progression in Imperfect Labour Markets : A Survey," LIDAM Discussion Papers IRES 2004032, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    16. Martin Weiss, 2009. "Higher Tax Rates on Labor? Evidence from German Panel Data," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(1), pages 73-92, March.
    17. Heijdra, Ben J. & Ligthart, Jenny E., 2004. "Labor tax reform and equilibrium unemployment: a search and matching approach," CCSO Working Papers 200409, University of Groningen, CCSO Centre for Economic Research.
    18. Matthias Weber & Arthur Schram, 2017. "The Non‐equivalence of Labour Market Taxes: A Real‐effort Experiment," Economic Journal, Royal Economic Society, vol. 127(604), pages 2187-2215, September.
    19. Goerke, Laszlo, 1997. "Taxes in an efficiency wage economy," Discussion Papers, Series II 335, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
    20. Hummel, Albert Jan & Jacobs, Bas, 2023. "Optimal income taxation in unionized labor markets," Journal of Public Economics, Elsevier, vol. 220(C).

    More about this item

    Keywords

    social security contributions; Efficiency wages; tax incidence; unemployment benefits;
    All these keywords.

    JEL classification:

    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp71. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Holger Hinte (email available below). General contact details of provider: https://edirc.repec.org/data/izaaade.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.