Economics at your fingertips  

Taxation and Unemployment in Models with Heterogeneous Workers

Marcus Hagedorn, Iourii Manovskii () and Sergiy Stetsenko
Additional contact information
Sergiy Stetsenko: GM Financial

Review of Economic Dynamics, 2016, vol. 19, 161-189

Abstract: We introduce ex-ante heterogeneity between workers and two technology shocks, neutral and investment-specific, as the driving forces into the basic Mortensen-Pissarides search and matching model. The calibrated model is simultaneously consistent with a strong response of labor market variables to cyclical fluctuations in productivity and a weaker response to changes in taxes found in cross-country data. The model also matches the evidence that countries with higher tax rates have higher aggregate productivity, lower skill premia, and higher unemployment rates among both high- and low-skilled workers. The key mechanism that allows us to achieve these results is that aggregate and group-specific productivities are endogenous and respond to changes in tax policy. (Copyright: Elsevier)

Keywords: Search; Matching; Business cycles; Heterogeneity; Labor markets (search for similar items in EconPapers)
JEL-codes: E24 E32 J63 J64 J68 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6) Track citations by RSS feed

Downloads: (external link)
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See for details.

Related works:
Software Item: Code and data files for "Taxation and Unemployment in Models with Heterogeneous Workers" (2015) Downloads
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:

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/

Access Statistics for this article

Review of Economic Dynamics is currently edited by Jonathan Heathcote and Vincenzo Quadrini

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

Page updated 2019-11-16
Handle: RePEc:red:issued:14-340