The paper studies simple strategies of labor tax reform in a search and matching model of the labor market featuring endogenous labor supply.Changing the composition of the tax wedge|that is, reducing a payroll tax and increasing a progressive wage tax such that the marginal tax wedge remains unaffected|increases employment, reduces the equilibrium unemployment rate, and increases public revenue as long as workers do not have all the bargaining power in wage negotiations.A strategy of replacing employment taxes by payroll taxes increases employment and reduces the equilibrium unemployment rate, while the effect on public revenue is ambiguous.
|Place of Publication||Tilburg|
|Number of pages||25|
|Publication status||Published - 2004|
|Name||CentER Discussion Paper|
- labour market