Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/46076
Authors: 
Burda, Michael C.
Weder, Mark
Year of Publication: 
2010
Series/Report no.: 
Discussion paper series // Forschungsinstitut zur Zukunft der Arbeit 5150
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 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.
Subjects: 
business cycles
labor markets
payroll taxes
unemployment
consumption-tightness puzzle
JEL: 
E24
J64
E32
Document Type: 
Working Paper

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