Payroll Taxes, Social Insurance, and Business Cycles

Michael Burda and Mark Weder

Journal of the European Economic Association, 2016, vol. 14, issue 2, 438-467

Abstract: Payroll taxes represent a major distortionary influence of governments on labor markets. This paper examines the role of time-varying payroll taxes and the social safety net for cyclical fluctuations in a nonmonetary economy with labor market frictions and unemployment insurance, when the latter is only imperfectly related to search effort. A balanced social insurance budget induces countercyclical payroll taxation, renders gross wages more rigid over the cycle and strengthens the model's endogenous propagation mechanism. For conventional calibrations, the model generates a negatively sloped Beveridge curve and countercyclical unemployment as well as substantial volatility and persistence of vacancies and unemployment.

JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (12)

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Related works:
Journal Article: PAYROLL TAXES, SOCIAL INSURANCE, AND BUSINESS CYCLES (2016)
Working Paper: Payroll Taxes, Social Insurance and Business Cycles (2010)
Working Paper: Payroll Taxes, Social Insurance and Business Cycles (2010)
Working Paper: Payroll Taxes, Social Insurance and Business Cycles (2010)
Working Paper: Payroll Taxes, Social Insurance and Business Cycles (2010)
Working Paper: Payroll taxes, social insurance and business cycles (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:oup:jeurec:v:14:y:2016:i:2:p:438-467.

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