Employment- and Growth Effects of Tax Reforms

Arbeitspapier

This paper explores how revenue-neutral tax reforms impact employment and economic growth in a model of endogenous growth and search frictions on the labor market. We analyze how savings and the incentive to create new jobs are affected by tax swaps between wage income taxes, payroll taxes, capital income taxes and taxes levied on capital costs. In our framework, the payroll tax is found to be neutral. If this tax is used to finance a cut in the capital income tax, we will observe an increase in both growth and, via the capitalization effect, employment. Most other tax reforms, however, imply a trade-off between employment and growth.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: cege Discussion Papers ; No. 29

Classification and Topics

• Classification: Wirtschaft
• Subject: search unemployment ; growth ; tax reform ; Steuerreform ; Neue Wachstumstheorie ; Arbeitsuche ; Friktionelle Arbeitslosigkeit ; Beschäftigungseffekt ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Birk, Angela ; Michaelis, Jochen
• Event: Veröffentlichung
• (who): University of Göttingen, Center for European, Governance and Economic Development Research (cege)
• (where): Göttingen
• (when): 2004

Further information

• Handle: http://hdl.handle.net/10419/22156
• Last update: 10.03.2025, 11:42 AM CET