Financing Unemployment Benefits: Dismissal versus Employment Taxes
This paper investigates the effects of using dismissal taxes to finance unemployment benefits. We compare dismissal and employment taxes in a model with search frictions. Employment taxes give rise to externalities because firms do not take into account the effects their dismissal decisions have on others. By introducing dismissal taxes to finance unemployment insurance, these externalities can partly be internalized. Taking into account the budget of the unemployment insurance, employment taxes can be reduced by more than necessary to offset the adverse effect of dismissal taxes on the firm value. The introduction of dismissal taxes leads to higher job creation and lower unemployment, in contrast to standard results concerning employment protection.
|Date of creation:||10 Feb 2005|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +49 7531 88 2314
Web page: http://www.uni-konstanz.de/forschergruppewiwi
More information through EDIRC
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.:
- Belot, M.V.K. & Boone, J. & van Ours, J.C., 2002.
"Welfare Effects of Employment Protection,"
2002-48, Tilburg University, Center for Economic Research.
- Bertola, Giuseppe, 1999. "Microeconomic perspectives on aggregate labor markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 45, pages 2985-3028 Elsevier.
- P Garibaldi, 1995.
"Job Flow Dynamics and Firing Restrictions,"
CEP Discussion Papers
dp0256, Centre for Economic Performance, LSE.
- Dale T Mortensen & Christopher Pissarides, 2001.
"Taxes, subsidies and equilibrium labor market outcomes,"
LSE Research Online Documents on Economics
2075, London School of Economics and Political Science, LSE Library.
- Dale T. Mortensen & Christopher A. Pissarides, 2002. "Taxes, Subsidies and Equilibrium Labor Market Outcomes," CEP Discussion Papers dp0519, Centre for Economic Performance, LSE.
- Mortensen, Dale T & Pissarides, Christopher, 2001. "Taxes, Subsidies and Equilibrium Labour Market Outcomes," CEPR Discussion Papers 2989, C.E.P.R. Discussion Papers.
- Mortensen, Dale T. & Pissarides, Christopher A., 1999.
"New developments in models of search in the labor market,"
Handbook of Labor Economics,
in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 39, pages 2567-2627
- Mortensen, Dale T & Pissarides, Christopher, 1999. "New Developments in Models of Search in the Labour Market," CEPR Discussion Papers 2053, C.E.P.R. Discussion Papers.
- Anderson, Patricia M. & Meyer, Bruce D., 2000. "The effects of the unemployment insurance payroll tax on wages, employment, claims and denials," Journal of Public Economics, Elsevier, vol. 78(1-2), pages 81-106, October.
- repec:dgr:kubcen:200390 is not listed on IDEAS
- Guillaume Rocheteau, 1999. "Can an Unemployment Insurance System Generate Multiple Natural Rates?," International Tax and Public Finance, Springer, vol. 6(3), pages 379-387, August.
- Olivier Blanchard & Jean Tirole, 2004. "The Optimal Design of Unemployment Insurance and Employment Protection. A First Pass," NBER Working Papers 10443, National Bureau of Economic Research, Inc.
- Dale T. Mortensen & Christopher A. Pissarides, 1993.
"Job Creation and Job Destruction in the Theory of Unemployment,"
CEP Discussion Papers
dp0110, Centre for Economic Performance, LSE.
- Mortensen, Dale T & Pissarides, Christopher A, 1994. "Job Creation and Job Destruction in the Theory of Unemployment," Review of Economic Studies, Wiley Blackwell, vol. 61(3), pages 397-415, July.
- Bertola, Giuseppe, 1990. "Job security, employment and wages," European Economic Review, Elsevier, vol. 34(4), pages 851-879, June.
- Bovenberg, A.L., 2003.
"Tax Policy and Labor Market Performance,"
2003-90, Tilburg University, Center for Economic Research.
- repec:dgr:kubcen:200248 is not listed on IDEAS
- Rocheteau, Guillaume, 1999. "Balanced-Budget Rules and Indeterminacy of the Equilibrium Unemployment Rate," Oxford Economic Papers, Oxford University Press, vol. 51(3), pages 399-409, July.
When requesting a correction, please mention this item's handle: RePEc:knz:hetero:0503. 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: (Gerald Eisenkopf)
If references are entirely missing, you can add them using this form.