Selective reductions in labor taxation: Labor market adjustments and macroeconomic performance

Batyra, Anna;Sneessens, Henri
(2010) Journal of Policy Modeling — Vol. 32, n° 4, p. 531-543 (2010)

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Authors
  • Batyra, AnnaUCLouvain
    Author
  • Sneessens, HenriUCLouvain
    Author
Abstract
We use a calibrated general equilibrium model with heterogeneous labor and search to evaluate the quantitative effects of various labor tax cut scenarios. The focus is on skill heterogeneity combined with downward wage rigidities at the low end of the skill ladder. Workers can take jobs for which they are overeducated. We compare targeted and non-targeted tax cuts, both with or without over-education effects. Introducing over-education changes substantially the employment, productivity and welfare effects of a tax cut, although tax cuts targeted on the least skilled workers always have larger effects. (C) 2010 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.
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  • Institution iconUCLouvainSSH/IMAQ - Institut multidisciplinaire pour la modélisation et l'analyse quantitative

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Batyra, A., & Sneessens, H. (2010). Selective reductions in labor taxation: Labor market adjustments and macroeconomic performance. Journal of Policy Modeling, 32(4), 531-543. https://doi.org/10.1016/j.jpolmod.2010.05.006 (Original work published 2010)