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Layoff taxes and minimum wage: Two complementary public policies

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  • Gavrel, Frédéric
  • Lebon, Isabelle
  • Rebière, Thérèse

Abstract

In a matching model in which the job destruction rate and the output are endogenous, we show that the presence of a binding minimum wage prompts firms to choose too risky jobs. Introducing layoff taxes therefore reduces unemployment and improves market efficiency.

Suggested Citation

  • Gavrel, Frédéric & Lebon, Isabelle & Rebière, Thérèse, 2010. "Layoff taxes and minimum wage: Two complementary public policies," Economics Letters, Elsevier, vol. 107(1), pages 30-32, April.
    • Handle: RePEc:eee:ecolet:v:107:y:2010:i:1:p:30-32
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    1. Wang, Cheng & Williamson, Stephen D., 2002. "Moral hazard, optimal unemployment insurance, and experience rating," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1337-1371, October.

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