Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/82842
Authors: 
Engström, Per
Holmlund, Bertil
Kolm, Ann-Sofie
Year of Publication: 
2001
Series/Report no.: 
Working Paper, Department of Economics, Uppsala University 2001:19
Abstract: 
The paper develops a two-sector general equilibrium search model where goods are produced exclusively in the market and services are produced both in the market and within the households. We use the model to examine how unemployment and welfare are affected by labor taxes in general and sectoral tax differentiation in particular. We find that a tax cut on services reduces unemployment whereas a tax cut on goods has no effect. A reform involving tax differentiation, with lower taxes on services, is welfare improving. Numerical calibrations of the model suggest that the welfare gains from tax differentiation are large if the government absorbs a substantial fraction of GDP.
Subjects: 
Taxation
Home production
Search
Unemployment
JEL: 
H21
J22
J41
J64
Document Type: 
Working Paper

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