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Employment and Growth Effects of Tax Reforms in a Growth-Matching Model

Angela Birk and Jochen Michaelis

No 26324, Discussion Paper Series from Hamburg Institute of International Economics

Abstract: This paper explores how revenue-neutral tax reforms impact employment and economic growth in models of exogenous and endogenous growth and search frictions on the labor market. We show that (i) a cut in the payroll tax financed by an increase in the wage tax lowers both equilibrium employment and the equilibrium growth rate, that (ii) a higher energy tax combined with a cut in wage taxes boosts employment but has an ambiguous effect on growth, and that (iii) a higher energy tax combined with a cut in payroll taxes enhances employment but mitigates economic growth.

Keywords: Labor and Human Capital; Public Economics (search for similar items in EconPapers)
Pages: 32
Date: 2002
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Persistent link: https://EconPapers.repec.org/RePEc:ags:hwwadp:26324

DOI: 10.22004/ag.econ.26324

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