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Title:Financing social security by taxing capital income: a bad idea? PDF Logo
Authors:Kunze, Lars
Schuppert, Christiane
Issue Date:2009
Series/Report no.:Ruhr economic papers 90
Abstract:This paper examines the growth effects of an increase of capital income taxes with additional revenue being devoted to cut wage-related social security contributions to reduce unemployment. The analysis is carried out in an overlapping generations model with endogenous growth, unemployment and a social security system comprising pensions and unemployment benefits. It is shown that the reform not only promotes employment but may additionally stimulate economic growth. Calibrating the model to match data for the EU15 reveals that European countries can indeed gain in form of higher employment and growth if the initial capital income tax is not too high.
Subjects:Capital income taxation
social security
imperfect labor market
overlapping generations
growth
JEL:H24
H55
O40
ISBN:978-3-86788-101-2
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des RWI
Ruhr Economic Papers, RWI

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