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Title:Payroll Taxes, Social Insurance and Business Cycles PDF Logo
Authors:Burda, Michael C.
Weder, Mark
Issue Date:2010
Series/Report no.:Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Understanding the Dynamics of Labor Markets D1-V1
Abstract:Payroll taxes represent a major distortionary influence of governments on labor markets. This paper examines the role of payroll taxation and the social safety net for cyclical fluctuations in an 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 downwardly-sloped Beveridge curve as well as substantial volatility and persistence of vacancies and unemployment.
Subjects:Business cycles
labor markets
payroll taxes
unemployment
JEL:E24
J64
E32
Document Type:Conference Paper
Appears in Collections:Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie

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