Selective Reductions in Labor Taxation: Labor Market Adjustments and Macroeconomic Performance

Anna Batyra () and Henri Sneessens

No 5013, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We use a calibrated general equilibrium model with heterogeneous labor and search to evaluate the quantitative effects of various labor tax cut scenarios. The focus is on skill heterogeneity combined with downward wage rigidities at the low end of the skill ladder. Workers can take jobs for which they are overeducated. We compare targeted and non-targeted tax cuts, both with or without over-education effects. Introducing over-education changes substantially the employment, productivity and welfare effects of a tax cut, although tax cuts targeted on the least skilled workers always have larger effects.

Keywords: minimum wage; job creation; job destruction; job competition; search unemployment; taxation; computable general equilibrium models (search for similar items in EconPapers)
JEL-codes: C68 E24 J64 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2010-06
New Economics Papers: this item is included in nep-dge, nep-edu, nep-lab, nep-mic and nep-pbe
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Published - published in: Journal of Policy Modeling, 2010, 32 (4), 531–543

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Related works:
Journal Article: Selective reductions in labor taxation: Labor market adjustments and macroeconomic performance (2010)
Working Paper: Selective Reductions in Labor Taxation Labour Market Adjustments and Macroeconomic Performance (2010)
Working Paper: Selective Reductions in Labor Taxation, Labour Market Adjustments and Macroeconomic Performance (2010)
Working Paper: Selective Reductions in Labour Taxation: Labour Market Adjustments and Macroeconomic Performance (2007)
Working Paper: Selective Reductions in Labour Taxation: Labour Market Adjustments and Macroeconomic Performance (2006)
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