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Funding public health care: A flat-rate premium might be bad for employment

Author

Listed:
  • Michael T. Feil

    (Institute for Employment Research)

Abstract

If "tax progression is good for employment in popular models of trade union behaviour" (Koskela and Vilmunen, 1996), then a flat-rate premium, as proposed as a means of funding for public health care, is bad. This note shows that replacing existing (proportional) social security contributions by a lump-sum payment increases labour costs and thus reduces employment. This result holds - for empirically relevant parameters - even in a more general case than the one considered by Koskela and Vilmunen. Policy advisers should be aware that in imperfect competitive labour markets the prima facie attractiveness of a flat-rate premium is not for sure.

Suggested Citation

  • Michael T. Feil, 2006. "Funding public health care: A flat-rate premium might be bad for employment," Economics Bulletin, AccessEcon, vol. 10(3), pages 1-10.
    • Handle: RePEc:ebl:ecbull:eb-06j50002
    as

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    File URL: http://www.accessecon.com/pubs/EB/2006/Volume10/EB-06J50002A.pdf
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    References listed on IDEAS

    as
    1. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084, Elsevier.
    2. Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, vol. 3(1), pages 65-80, August.
    3. Bovenberg, A.L., 2003. "Tax Policy and Labor Market Performance," Discussion Paper 2003-90, Tilburg University, Center for Economic Research.
    4. Bovenberg, A.L., 2003. "Tax Policy and Labor Market Performance," Other publications TiSEM 68fd52eb-a6d6-4300-8636-c, Tilburg University, School of Economics and Management.
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    Cited by:

    1. Feil, Michael & Klinger, Sabine & Zika, Gerd, 2006. "Sozialabgaben und Beschäftigung : Simulationen mit drei makroökonomischen Modellen," IAB-Discussion Paper 200622, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].

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    More about this item

    JEL classification:

    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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