Taxes and unemployment

Rajit Biswas and Vandana Thandassery Ramakrishnan

International Journal of Economic Theory, 2022, vol. 18, issue 2, 182-194

Abstract: The present model revisits the issue of unit and ad valorem taxes in a model of monopolistic competition. It is shown that if the assumption of full employment is relaxed, then taxation can increase employment conditionally when the elasticity of substitution among varieties is low. Moreover, with the same level of initial unemployment, ad valorem tax is better than unit tax in terms of employment, when the targeted tax revenue is relatively high and scale economies are strong.

Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:bla:ijethy:v:18:y:2022:i:2:p:182-194

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