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Title:Value-added Tax versus Social Security Contributions PDF Logo
Authors:Goerke, Laszlo
Issue Date:1999
Series/Report no.:IZA Discussion paper series 55
Abstract:In order to alleviate unemployment it is often recommended to reduce social security contributions (SSC) and to compensate for the ensuing loss in revenues by a rise in the value-added tax (VAT). Assuming unemployment to be caused by efficiency wages, it is shown that a balanced-budget shift from a payroll tax to a VAT will increase employment if the rise in the VAT does not alter consumer prices. If the effects of a shift from SSC to the VAT on the worker's effort are neutralised, for example, by imposing a constant wedge, the employment impact will depend on the nature of the unemployment compensation system.
Subjects:Efficiency wages
social security contributions
unemployment
value-added tax
JEL:H25
J41
J32
H24
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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