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Reducing social contributions on unskilled labour as a way of fighting unemployment: An empirical evaluation for the case of Spain

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Abstract

In this paper we provide an empirical evaluation of the effects of a cut in social security contributions (i) for all types of labour, and (ii) only for unskilled labour, within a computable general equilibrium model simulated for the Spanish economy. The model allows firms to follow a non-competitive price rule, and incorporates an equal yield assumption, which means that the reduction in social security contributions is compensated with an increase in value-added tax rates, so that the public sector deficit is not affected. In addition, the labour market is assumed to follow a matching unemployment rule, which allows to model in a simple way any frictions present in that market.

Suggested Citation

  • Óscar Bajo Rubio & Antonio Gómez Gómez-Plana, 2001. "Reducing social contributions on unskilled labour as a way of fighting unemployment: An empirical evaluation for the case of Spain," Documentos de Trabajo - Lan Gaiak Departamento de Economía - Universidad Pública de Navarra 0102, Departamento de Economía - Universidad Pública de Navarra.
    • Handle: RePEc:nav:ecupna:0102
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    6. Kemal Dervis & Jaime de Melo & Sherman Robinson, 2015. "A General Equilibrium Analysis Of Foreign Exchange Shortages In A Developing Economy," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 4, pages 71-86, World Scientific Publishing Co. Pte. Ltd..
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    8. B Bell & Stephen Nickell, 1996. "Would Cutting Payroll Taxes on the Unskilled Have a Significant Effect on Unemployment?," CEP Discussion Papers dp0276, Centre for Economic Performance, LSE.
    9. Inmaculada Garcia & Jose Alberto Molina, 1998. "Household labour supply with rationing in Spain," Applied Economics, Taylor & Francis Journals, vol. 30(12), pages 1557-1570.
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    12. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-138, March.
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    Cited by:

    1. Volker Meinhardt & Rudolf Zwiener, 2005. "Gesamtwirtschaftliche Wirkungen einer Steuerfinanzierung versicherungsfremder Leistungen in der Sozialversicherung: Endbericht ; Forschungsprojekt im Auftrag des DGB Bundesvorstandes, der Hans-Böckler," DIW Berlin: Politikberatung kompakt, DIW Berlin, German Institute for Economic Research, volume 7, number pbk7, April.
    2. Campoy-Muñoz, Pilar & Cardenete Flores, Manuel Alejandro & Delgado, M. Carmen & Hewings, Geoffrey, 2016. "Effects of a reduction in employers' social security contributions: Evidence from Spain," Economics Discussion Papers 2016-32, Kiel Institute for the World Economy (IfW Kiel).
    3. Bajo-Rubio, Oscar & Gomez-Plana, Antonio G., 2005. "Simulating the effects of the European Single Market: A CGE analysis for Spain," Journal of Policy Modeling, Elsevier, vol. 27(6), pages 689-709, September.
    4. Antonio Gómez Gómez-Plana, "undated". "Simulación De Políticas Económicas: Los Modelos De Equilibrio General Aplicado," Working Papers 35-02 Classification-JEL , Instituto de Estudios Fiscales.
    5. Latorre, María C. & Bajo-Rubio, Oscar & Gómez-Plana, Antonio G., 2009. "The effects of multinationals on host economies: A CGE approach," Economic Modelling, Elsevier, vol. 26(5), pages 851-864, September.
    6. Oscar Bajo-Rubio & Antonio G. Gómez-Plana, 2015. "Alternative strategies to reduce public deficits: Taxes vs. spending," Journal of Applied Economics, Universidad del CEMA, vol. 18, pages 45-70, May.
    7. Javier Ferri & Antonio G. Gómez-Plana & Joan A. Martín-Montaner, 2006. "Illegal immigration booms and welfare in the host country," European Journal of Population, Springer;European Association for Population Studies, vol. 22(4), pages 353-370, December.
    8. Mar�a Teresa �lvarez-Mart�nez & Clemente Polo, 2014. "Reduce Employers' Social Security Contributions And Control Labor Fraud: Remedies For Spain'S Ailing Economy?," Economic Systems Research, Taylor & Francis Journals, vol. 26(2), pages 141-154, June.
    9. Antonio G. Gómez-Plana & Oscar Bajo-Rubio, "undated". "Algunos efectos del mercado único europeo sobre la economía espanola: Un análisis a través de un modelo de equilibrio general aplicado," Studies on the Spanish Economy 213, FEDEA.

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    More about this item

    Keywords

    Computable general equilibrium; unemployment; unskilled labour; social contributions.;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General

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