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Title:Selective reductions in labor taxation: Labor market adjustments and macroeconomic performance PDF Logo
Authors:Batyra, Anna
Sneessens, Henri R.
Issue Date:2010
Series/Report no.:Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5013
Abstract:We use a calibrated general equilibrium model with heterogeneous labor and search to evaluate the quantitative effects of various labor tax cut scenarios. The focus is on skill heterogeneity combined with downward wage rigidities at the low end of the skill ladder. Workers can take jobs for which they are overeducated. We compare targeted and non-targeted tax cuts, both with or without over-education effects. Introducing over-education changes substantially the employment, productivity and welfare effects of a tax cut, although tax cuts targeted on the least skilled workers always have larger effects.
Subjects:Minimum wage
job creation
job destruction
job competition
search unemployment
taxation
computable general equilibrium models
JEL:C68
E24
J64
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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