Can Tax Progression Raise Employment? A Study of Four European Countries

John P. Hutton and Anna Ruocco ()

Discussion Papers from Department of Economics, University of York

Abstract: This paper shows that increases in direct tax progression tend to reduce wages and increase welfare and employment, even in a model allowing for labour supply effects. The employment effect is reversed when benefit levels are low, however. The model shows the different impacts on full and parttime workers, and on men and women. The countries modelled are France, Germany, Italy and the UK. An efficiency wage sector with training costs generates unemployment effects. Households choose between an efficiency wage sector and a market-clearing sector.

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Persistent link: https://EconPapers.repec.org/RePEc:yor:yorken:99/21

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