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

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.


Issue Date:
2002
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/26324
Total Pages:
32
JEL Codes:
E6; H2; J6; O4
Series Statement:
HWWA Discussion Paper 208




 Record created 2017-04-01, last modified 2017-08-24

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