Child Support and Involuntary Unemployment

Ryouichi Ikeda ()
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Ryouichi Ikeda: Graduate School of Economics, Osaka University

No 10-05, Discussion Papers in Economics and Business from Osaka University, Graduate School of Economics

Abstract: Research was conducted concerning the effects of child support. Many earlier studies have assumed full employment. However, in the real economy, there is unemployment. The relation between the number of children in the economy and unemployment was investigated. The overlapping generation model with involuntary unemployment was used because wages were set by labor unions. First, in the analytical research, it was found that the wage tax for child support and unemployment insurance both increased unemployment and that the wage tax for child support decreased equilibrium capital stock. Also, the wage tax for unemployment insurance reduced the number of the children in the economy. Second, a simulation was conducted, which revealed that there is a tax rate at which the number of the children is maximized. At tax rates for child support higher than this maximum, any increase in the tax rate for child support decreases the number of the children! The conclusion showed that tax rates for child support that are too high have a diminishing effect and policy makers should consider the effects of the wage tax for child support and unemployment.

Keywords: overlapping generation model; involuntary unemployment; child support (search for similar items in EconPapers)
JEL-codes: J13 J51 J64 (search for similar items in EconPapers)
Pages: 14 pages
Date: 2010-02
New Economics Papers: this item is included in nep-dge and nep-lab
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