Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/85500
Authors: 
Riedl, Arno
van Winden, Frans
Year of Publication: 
2000
Series/Report no.: 
Tinbergen Institute Discussion Paper 00-112/1
Abstract: 
We investigate experimentally the economic effects of wage taxation to finance unemployment benefits for a closed economy and an international economy. The main findings are the following. (i) There is clear evidence of a vicious circle in the dynamic interaction between the wage tax and unemployment. (ii) Employment is boosted by budget deficits but subsequent tax rate adjustments to balance the budget lead to employment levels substantially lower than theoretically predicted. (iii) A sales risk for producers due to price uncertainty on output markets appears to cause a downward pressure on factor employment. For labor the wage tax exacerbates this adverse effect.
Subjects: 
Experiments
international economics
wage taxation
unemployment
JEL: 
C90
D50
E24
F41
Document Type: 
Working Paper

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