Payroll taxes, social insurance and business cycles

Michael Burda and Mark Weder

No 2010-042, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: Payroll taxes represent a major distortionary in uence 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: business cycles; labor markets; payroll taxes; unemployment; consumptiontightness puzzle (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Date: 2010
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https://www.econstor.eu/bitstream/10419/56745/1/637055500.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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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2010-042

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