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.
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- Marimon, Ramon & Zilibotti, Fabrizio, 2000. "Employment and distributional effects of restricting working time," European Economic Review, Elsevier, vol. 44(7), pages 1291-1326, June.Full references (including those not matched with items on IDEAS)
- 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, 1999. "Employment and Distributional Effects of Restricting Working Time," CEPR Discussion Papers 2127, C.E.P.R. Discussion Papers.
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