Value-added Tax versus Social Security Contributions

Laszlo Goerke

No 55, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: In order to alleviate unemployment it is often recommended to reduce social security contributions (SSC) and to compensate for the ensuing loss in revenues by a rise in the value-added tax (VAT). Assuming unemployment to be caused by efficiency wages, it is shown that a balanced-budget shift from a payroll tax to a VAT will increase employment if the rise in the VAT does not alter consumer prices. If the effects of a shift from SSC to the VAT on the worker’s effort are neutralised, for example, by imposing a constant wedge, the employment impact will depend on the nature of the unemployment compensation system.

Keywords: Efficiency wages; social security contributions; unemployment; value-added tax (search for similar items in EconPapers)
JEL-codes: H24 H25 J32 J41 (search for similar items in EconPapers)
Pages: 23 pages
Date: 1999-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Published - published in: Jahrbücher für Nationalökonomie und Statistik, 1999, 219 (3/4), 308-325

Downloads: (external link)
https://docs.iza.org/dp55.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp55

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().