Should we tax overtime, subsidize the wage or subsidize employment?
This paper compares the macroeconomic implications of taxing overtime and using two kinds of subsidies, an employment and a wage subsidy, in a model where team work and commuting costs subject to congestion are key determinants of the choice of the workweek. To obtain reliable estimates, I calibrate the model to the substitutability between the workweek and employment using business cycle information. I find that subsidizing employment can achieve the same employment increase than taxing overtime but at a lower cost in terms of output, productivity, wages and welfare. The wage subsidy that achieves the same employment increase turns out to be very costly from a fiscal point of view, 12.7% of output versus 4.57% of output in the employment subsidy experiment.
|Date of creation:||Feb 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Carretera de Utrera km.1, 41013 Sevilla|
Phone: + 34 954 34 8913
Fax: + 34 954 34 9339
Web page: http://www.upo.es/econ/
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.:
- Bils, Mark & Cho, Jang-Ok, 1994.
"Cyclical factor utilization,"
Journal of Monetary Economics,
Elsevier, vol. 33(2), pages 319-354, April.
- Mark Bils & Jang-Ok Cho, 1993. "Cyclical factor utilization," Discussion Paper / Institute for Empirical Macroeconomics 79, Federal Reserve Bank of Minneapolis.
- Cho, Jang-Ok & Rogerson, Richard, 1988. "Family labor supply and aggregate fluctuations," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 233-245.
- Marimon, R. & Zilibotti, F., 1999.
"Employment and Distributional Effects of Restricting Working Time,"
Economics Working Papers
eco99/19, European University Institute.
- Marimon, Ramon & Zilibotti, Fabrizio, 2000. "Employment and distributional effects of restricting working time," European Economic Review, Elsevier, vol. 44(7), pages 1291-1326, June.
- Marimon, Ramon & Zilibotti, Fabrizio, 1999. "Employment and Distributional Effects of Restricting Working Time," CEPR Discussion Papers 2127, C.E.P.R. Discussion Papers.
- Cardullo, Gabriele & Van der Linden, Bruno, 2006.
"Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach,"
IZA Discussion Papers
2073, Institute for the Study of Labor (IZA).
- Gabriele Cardullo & Bruno Van der Linden, 2007. "Employment Subsidies and Substitutable Skills: An Equilibrium Matching Approach," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(4), pages 375-404.
- Gabriele, CARDULLO & Bruno, VANDERLINDEN, 2006. "Employment subsidies and substitutable skills : An equilibrium matching approach," Discussion Papers (ECON - Département des Sciences Economiques) 2006010, Université catholique de Louvain, Département des Sciences Economiques.
- Victoria Osuna & Jose-Victor Rios-Rull, 2003.
"Implementing the 35 Hour Workweek by Means of Overtime Taxation,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 6(1), pages 179-206, January.
- Victoria Osuna Padilla & José-Víctor Ríos-Rull, 2002. "Implementing the 35 Hour Workweek by Means of Overtime Taxation," Economic Working Papers at Centro de Estudios Andaluces E2002/04, Centro de Estudios Andaluces.
- Hansen, Gary D., 1985.
"Indivisible labor and the business cycle,"
Journal of Monetary Economics,
Elsevier, vol. 16(3), pages 309-327, November.
- Cho, J-O. & Cooley, T.F., 1988.
"Employment And Hours Over The Business Cycle,"
88-03, Rochester, Business - General.
- Orszag, J. Michael & Snower, Dennis J., 2003. "Designing employment subsidies," Labour Economics, Elsevier, vol. 10(5), pages 557-572, October.
- Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 1990.
"Labor Hoarding and the Business Cycle,"
NBER Working Papers
3556, National Bureau of Economic Research, Inc.
When requesting a correction, please mention this item's handle: RePEc:pab:wpaper:09.03. 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: (Publicación Digital - UPO)
If references are entirely missing, you can add them using this form.