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A tax-based incomes policy that removes sectoral labour market imbalances


  • Ian P. Hare

    (St. John's, Canada)


A modified version of a tax-based incomes policy (TIP) incentive tax is proposed that retains the aggregate wage-restraining effect of the tax proposed by Jackman and Layard, but in addition should help to speed the elimination of unemployment that results from the slow response of relative wages to sectoral labour surpluses or shortages. This effect is illustrated using a two-sector model with downwardly inflexible nominal wages.

Suggested Citation

  • Ian P. Hare, 2003. "A tax-based incomes policy that removes sectoral labour market imbalances," Macroeconomics 0311006, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0311006
    Note: Type of Document - ASCII text; pages: 16

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    Incomes policy; unemployment;

    JEL classification:

    • E64 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Incomes Policy; Price Policy
    • J68 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Public Policy

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