The Wedge

Goerke, Laszlo

doi:10.1111/1467-9957.00221

Cited by 9 publications

(7 citation statements)

References 14 publications

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“…The Corollary 3 confirms the recent result by Goerke (2000). This author studies the employment effect of tax reforms that keep the`tax wedge' constant in labour markets with efficiency wage.…”

Section: Efficiency Wage Modelssupporting

confidence: 83%

On the Equivalence of Taxes Paid by Employers and Employees

Picard

Toulemonde

2001

Scottish J Political Eco

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In this paper we study the employment effects of a budget neutral restructuring of taxes levied on employers and employees. We derive conditions for taxes levied on workers to have the same employment effects as taxes levied on firms under standard processes of wage determination. I INTRODUCTIONMost countries finance their expenditures and the social security by a mix of taxes paid by workers and by employers. Generally the taxes are related to the wages received by employees. This raises the question of the equivalence of these taxes: do taxes levied on wages have the same impact on employment if they are paid by workers or by firms? Put in another way, does a switch between taxes paid by employers and taxes paid by employees affect employment? Clearly the answer is no in a perfectly competitive market: replacing an employer's tax by an employee's tax of equal magnitude has no effect on the net wage, the gross wage or the employment level (Symons and Robertson, 1990). Still empirical evidence suggests that the answer is yes (see e.g. Lockwood and Manning, 1993;Holm et al., 1994; TyrvaÈ inen, 1995;Muysken et al., 1999), and union leaders would surely not be indifferent to an increase in the employees' taxation rate that would be compensated by a decrease in the employers' taxation rate. Therefore there is a need to depart from perfectly competitive markets to fit the facts. 1 This is what is done in a union framework by Rasmussen (1993), Holm et al. (1995 or Koskela and Schob (1999). However these models heavily rely on a non linear taxation to explain the non-equivalence result. In this paper we show that even in the case of linear taxation, both taxes may not be equivalent and we extend the results to nonunion frameworks. 2 Our model is partly related to that of Bovenberg and van der 1 This departure from perfectly competitive markets is also needed to explain why a tax per head has a different employment impact than a tax on the wage bill (see e.g. Pisauro, 1991;Rasmussen, 1997Rasmussen, , 1998. 2 Our paper encompasses results of Goerke (2000) who focuses on efficiency wage models.

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Section: Efficiency Wage Modelssupporting

confidence: 83%

On the Equivalence of Taxes Paid by Employers and Employees

Picard

Toulemonde

2001

Scottish J Political Eco

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“…The labor market institutions and conditions have thus an important influence on the effect of different labor taxes. In reality, nominal contractual wages are characterized by a downward rigidity and prices (and real wages) are sticky (OECD, 1990;Goerke, 2000). At least in the short run, switching from employee to employer based income taxes increases wage cost to the employer and, unless the firm can charge higher prices or pass the costs on to the employee, will face a decline in profits (Rutkowski andWalewski, 2007, Daveri andTabellini 2000).…”

Section: Defever (2006) Focuses On the Co-location Of Non-european Fimentioning

confidence: 99%

Effective labor taxation and the international location of headquarters

Egger

Rădulescu

Strecker

2013

Int Tax Public Finance

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Profit taxes are widely acknowledged to influence the location of firms' headquarters. This paper sheds light on the role of aspects of labor taxation for the international location of headquarters. While profit taxes can be avoided in various ways, it is much harder for firms to manipulate the firm-specific labor tax base so that labor taxes may be relatively important for firm location. We construct a unique data set of effective labor taxes in 120 countries and use data on the location of 35,206 firms to analyze the impact of labor income tax rates, the progressivity of the income tax schedule, and social security contributions on firms' decisions where to locate their headquarters. The findings suggest that both a higher progressivity of the tax system and higher (employeeand employer -borne) social security contributions negatively influence a country's attractiveness for headquarters location. Hence, a one percentage point increase in these payroll taxes, reduces the probability of a country to attract headquarters by 6.1 percent. The results prove robust in various empirical model specifications and subsets of the data. JEL-classification: H24; C25

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“…The unemployment benefit systems in the OECD countries are found in between this alternative specification and the one considered in the previous section where a fraction of the past period earned wage was assigned to the unemployed (see Goerke, 2000).…”

Section: An Alternative Institutional Set-upmentioning

confidence: 99%

Dynamic effects of regulation and deregulation in goods and labour markets

Commendatore¹,

Kubin

2008

Oxford Economic Papers

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Modern macroeconomic models with a Keynesian flavour usually involve nominal rigidities in wages and goods prices. A typical model is static and combines wage bargaining in the labour markets and monopolistic competition in the goods markets. As central policy implication it follows that deregulating labour and/or goods markets increases equilibrium employment.We reassess the consequences of deregulation in a dynamic model. It still increases employment at the fixed point, which corresponds to the static equilibrium solution. However, deregulation may also lead to stability loss and endogenous fluctuations.

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The Wedge

Cited by 9 publications

References 14 publications

On the Equivalence of Taxes Paid by Employers and Employees

On the Equivalence of Taxes Paid by Employers and Employees

Effective labor taxation and the international location of headquarters

Dynamic effects of regulation and deregulation in goods and labour markets

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