Three Theorems on Inflation Taxes and Marginal Employment Subsidies

Andrew Oswald

No 547, Working Papers from Princeton University, Department of Economics, Industrial Relations Section.

Abstract: The paper studies the microeconomic theory of inflation taxes and marginal employment subsidies. It proves that under very weak assump- tions (i) an inflation tax will reduce the 1ong-run equilibrium wage or price and (ii) that a marginal employment subsidy will raise the long- run equilibrium employment level. The theorems, which show the policies' formal similarities, are illustrated with examples. One caveat is also raised: in a competitive industry (rather than a single firm), with free entry and exit, a marginal employment subsidy might reduce the total number of jobs. The paper also proves (iii) that in special circumstances a tax on inflation is exactly equivalent to a marginal employment subsidy.

JEL-codes: N00 (search for similar items in EconPapers)
Date: 1983-09
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Three Theorems on Inflation Taxes and Marginal Employment Subsidies (1984)
Working Paper: Three Theorems on Inflation Taxes and Marginal Employment Subsidies (1982)
Working Paper: Three Theorems on Inflation Taxes and Marginal Employment Subsidies (1982)
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Persistent link: https://EconPapers.repec.org/RePEc:pri:indrel:167

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