Payroll taxes, social insurance and business cycles

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dc.contributor.authorBurda, M.
dc.contributor.authorWeder, M.
dc.date.issued2016
dc.descriptionArticle first published online: 21 JUL 2015
dc.description.abstractPayroll taxes represent a major distortionary influence of governments on labor markets. This paper examines the role of time-varying payroll taxes 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 induces countercyclical payroll taxation, renders gross wages more rigid over the cycle and strengthens the model's endogenous propagation mechanism. For conventional calibrations, the model generates a negatively sloped Beveridge curve and countercyclical unemployment as well as substantial volatility and persistence of vacancies and unemployment.
dc.description.statementofresponsibilityMichael C. Burda and Mark Weder
dc.identifier.citationJournal of the European Economic Association, 2016; 14(2):438-467
dc.identifier.doi10.1111/jeea.12145
dc.identifier.issn1542-4766
dc.identifier.issn1542-4774
dc.identifier.urihttp://hdl.handle.net/2440/98232
dc.language.isoen
dc.publisherWiley
dc.relation.granthttp://purl.org/au-research/grants/arc/DP1096358
dc.relation.granthttp://purl.org/au-research/grants/arc/DP1096358
dc.rights© 2015 by the European Economic Association
dc.source.urihttp://dx.doi.org/10.1111/jeea.12145
dc.subjectBusiness cycles
dc.subjectconsumption-tightness puzzle
dc.subjectlabor markets
dc.subjectpayroll taxes
dc.subjectunemployment
dc.titlePayroll taxes, social insurance and business cycles
dc.typeJournal article
pubs.publication-statusPublished

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