Payroll Taxes, Social Insurance and Business Cycles

Michael Burda and Mark Weder

No 5150, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Payroll taxes represent a major distortionary influence of governments on labor markets. This paper examines the role of payroll taxation 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 renders gross wages more rigid over the cycle and, as a result, strengthens the model's endogenous propagation mechanism. For conventional calibrations, the model generates a negatively sloped Beveridge curve as well as substantial volatility and persistence of vacancies and unemployment.

Keywords: consumption-tightness puzzle; unemployment; payroll taxes; labor markets; business cycles (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2010-08
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab, nep-mac and nep-pub
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (22)

Published - published in: Journal of European Economic Association, 2016, 14 (2), 436 - 467

Downloads: (external link)
https://docs.iza.org/dp5150.pdf (application/pdf)

Related works:
Journal Article: PAYROLL TAXES, SOCIAL INSURANCE, AND BUSINESS CYCLES (2016)
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)
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