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Taxes and unemployment

Author

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  • Rajit Biswas
  • Vandana Thandassery Ramakrishnan

Abstract

The present model revisits the issue of unit and ad valorem taxes in a model of monopolistic competition. It is shown that if the assumption of full employment is relaxed, then taxation can increase employment conditionally when the elasticity of substitution among varieties is low. Moreover, with the same level of initial unemployment, ad valorem tax is better than unit tax in terms of employment, when the targeted tax revenue is relatively high and scale economies are strong.

Suggested Citation

  • Rajit Biswas & Vandana Thandassery Ramakrishnan, 2022. "Taxes and unemployment," International Journal of Economic Theory, The International Society for Economic Theory, vol. 18(2), pages 182-194, June.
    • Handle: RePEc:bla:ijethy:v:18:y:2022:i:2:p:182-194
    DOI: 10.1111/ijet.12299
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    References listed on IDEAS

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