Three Theorems on Inflation Taxes and Marginal Employment Subsidies
The paper studies the micro-economics of inflation taxes and marginal employment subsidies. It proves under very weak assumptions (i) an inflation tax will reduce the long-run equilibrium wage or price and (ii) that a marginal employment subsidy will raise the long-run equilibrium employment level. The theorems are illustrated with examples. The paper also proves (iii) that in special circumstances a tax on inflation is exactly equilivalent to a marginal employment subsidy.
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|Date of creation:||Sep 1983|
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