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Employment and Growth Effects of Tax Reforms in a Growth-Matching Model

Author

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  • Birk, Angela
  • Michaelis, Jochen

Abstract

This paper explores how revenue-neutral tax reforms impact employment and economic growth in models of exogenous and endogenous growth and search frictions on the labor market. We show that (i) a cut in the payroll tax financed by an increase in the wage tax lowers both equilibrium employment and the equilibrium growth rate, that (ii) a higher energy tax combined with a cut in wage taxes boosts employment but has an ambiguous effect on growth, and that (iii) a higher energy tax combined with a cut in payroll taxes enhances employment but mitigates economic growth.

Suggested Citation

  • Birk, Angela & Michaelis, Jochen, 2002. "Employment and Growth Effects of Tax Reforms in a Growth-Matching Model," Discussion Paper Series 26324, Hamburg Institute of International Economics.
    • Handle: RePEc:ags:hwwadp:26324
    DOI: 10.22004/ag.econ.26324
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    Cited by:

    1. Krimmer, Pascal & Raffelhüschen, Bernd, 2003. "Intergenerative Umverteilung und Wachstumsimpulse der Steuerreformen 1999 bis 2005: Die Perspektive der Generationenbilanz," Discussion Papers 105, Albert-Ludwigs-Universität Freiburg, Institut für Finanzwissenschaft.
    2. Michaelis, Jochen & Birk, Angela, 2006. "Employment- and growth effects of tax reforms," Economic Modelling, Elsevier, vol. 23(6), pages 909-925, December.

    More about this item

    Keywords

    Labor and Human Capital; Public Economics;

    JEL classification:

    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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