Payroll Taxes, Social Insurance and Business Cycles

Michael Burda and Mark Weder

No 2010-17, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: Payroll taxes represent a major distortionary in uence of governments on labor markets. This paper examines the role of payroll taxation and the social safety net for cyclical uctuations in a nonmonetary economy with labor market frictions and unemployment insurance, when the latter is only imperfectly related to search effort. A balanced social insurance budget renders gross wages more rigid over the cycle and, as a result, strengthens the modelÂ’s endogenous propagation mechanism. For conventional calibrations, the model generates a negatively sloped Beveridge curve as well as substantial volatility and persistence of vacancies and unemployment.

Keywords: business cycles; labor markets; payroll taxes; unemployment; consumption-tightness puzzle (search for similar items in EconPapers)
JEL-codes: E24 E32 J64 (search for similar items in EconPapers)
Pages: 41https://media.adelaide.edu.au/economics/
Date: 2010-08
New Economics Papers: this item is included in nep-dge, nep-ias, nep-lab and nep-mac
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Citations: View citations in EconPapers (22)

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Related works:
Journal Article: PAYROLL TAXES, SOCIAL INSURANCE, AND BUSINESS CYCLES (2016)
Journal Article: Payroll Taxes, Social Insurance, and Business Cycles (2016)
Working Paper: Payroll Taxes, Social Insurance and Business Cycles (2010)
Working Paper: Payroll Taxes, Social Insurance and Business Cycles (2010)
Working Paper: Payroll Taxes, Social Insurance and Business Cycles (2010)
Working Paper: Payroll taxes, social insurance and business cycles (2010)
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