Social Security Tax Reform and Unemployment: A General Equilibrium Analysis for France

Publication Date:

May 1, 1997

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper develops and calibrates a simple general equilibrium model with two types of labor and capital for the French economy. The simulation results indicate that targeted reductions in employer social security taxes have six times as large an effect on employment as untargeted reductions for equal initial budgetary cost, while employee social security tax reductions have a negative effect on employment. They also point to the presence of “self-financing,” whereby reductions in various tax rates lead to lower budget deficits in the long run, as a result of an expanding tax base and lower unemployment insurance outlays.1

Series:

Working Paper No. 1997/059

Subject:

Employment Income tax systems Labor Social security contributions Taxes Unemployment Wages

English

Publication Date:

May 1, 1997

ISBN/ISSN:

9781451966008/1018-5941

Stock No:

WPIEA0591997

Pages:

29

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