Reducing Social Contributions for Unskilled Labor as a Way of Fighting Unemployment: An Empirical Evaluation for the Case of Spain

Oscar Bajo-Rubio () and Antonio Gómez Gómez-Plana ()

FinanzArchiv: Public Finance Analysis, 2004, vol. 60, issue 2, pages 160-

Abstract: We provide an empirical evaluation of the effects of a cut in social security contributions (i) for all types of labor and (ii) only for unskilled labor, within a computable generalequilibrium model simulation of the Spanish economy. The model allows firms to follow a noncompetitive price rule, and incorporates an equal-yield assumption, which means that the reduction in social security contributions is compensated with an increase in value-added tax rates, so the public-sector deficit is not affected. In addition, the labor market is assumed to follow a matching unemployment rule, which allows us to model in a simple way any frictions present in that market.

Keywords: computable general equilibrium models (CGE); unemployment; unskilled labor; social contributions (search for similar items in EconPapers)
JEL-codes: D58 H20 (search for similar items in EconPapers)
Date: 2004
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