The general equilibrium effects of social security contributions under alternative incidence assumptions

Maria Llop and Antonio Manresa

Applied Economics Letters, 2004, vol. 11, issue 13, 847-850

Abstract: This study deals with the economic effects of a firm's social security taxes in the Catalan economy, using an applied general equilibrium model. A novel aspect of the analysis is that it hypothesizes about the incidence of firm's contributions on both employers and employees. The results of a reduction in firm's social security taxation are sensitive to the incidence assumption. In particular, the study shows that the effects on regional unemployment, income distribution and relative prices of factors depend considerably on the incidence hypothesis assumed.

Date: 2004
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DOI: 10.1080/1350485042000258265

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