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Employment and Wage Effects of Social Security Financing: An Empirical Analysis of the West German Experience and some Policy Simulations

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  • Steiner, Viktor

Abstract

This paper follows up recent work on the relationship between (un?)employment and wage effects of social security financing undertaken by the OECD Jobs Study. Based on a simple macroeconometric model of the labour market, I investigate whether the peculiar OECD results for Germany on the incidence of social security contributions and taxes also hold up within a somewhat different model. The study also provides some policy simulations to answer the topical question whether increasing indirect taxes to finance a reduction of the contribution rates to social security levied on employees and employers in Germany. The main result of the paper is that there is in fact a positive short?run employment effect of a revenue neutral switch of financing social security expenditures by increasing indirect taxes and reducing employers' contribution rates, but in the longer?term only modest effects remain due to higher wages.

Suggested Citation

  • Steiner, Viktor, 1996. "Employment and Wage Effects of Social Security Financing: An Empirical Analysis of the West German Experience and some Policy Simulations," ZEW Discussion Papers 96-14, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:7130
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    Cited by:

    1. Volker Meinhardt & Rudolf Zwiener, 2005. "Gesamtwirtschaftliche Wirkungen einer Steuerfinanzierung versicherungsfremder Leistungen in der Sozialversicherung: Endbericht ; Forschungsprojekt im Auftrag des DGB Bundesvorstandes, der Hans-Böckler," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 7, number pbk7.
    2. Thomas Bauer & Regina Riphahn, 2002. "Employment effects of payroll taxes - an empirical test for Germany," Applied Economics, Taylor & Francis Journals, vol. 34(7), pages 865-876.
    3. Glismann, Hans H. & Schrader, Klaus, 2000. "Zur Reform der deutschen Arbeitslosenversicherung: Probleme und Lösungsansätze in der deutschen Literatur," Kiel Working Papers 995, Kiel Institute for the World Economy (IfW).
    4. Volker Meinhardt & Rudolf Zwiener, 1997. "Steuerfinanzierung von versicherungsfremden Leistungen in der Sozialversicherung," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 66(3/4), pages 352-361.

    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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