Payroll taxes, social insurance and business cycles

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IZA Discussion Papers ; No. 5150

Classification and Topics

• Classification: Wirtschaft ; Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity ; Unemployment: Models, Duration, Incidence, and Job Search ; Business Fluctuations; Cycles
• Subject: business cycles ; labor markets ; payroll taxes ; unemployment ; consumption-tightness puzzle ; Lohnsummensteuer ; Steuerwirkung ; Arbeitslosenversicherung ; Konjunkturelle Arbeitslosigkeit ; Arbeitsplatzsuchmodell ; OECD-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Burda, Michael C. ; Weder, Mark
• Event: Veröffentlichung
• (who): Institute for the Study of Labor (IZA)
• (where): Bonn
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/46076
• Last update: 10.03.2025, 11:44 AM CET