Social Security Tax Reform and Unemployment: A General Equilibrium Analysis for France
May 1, 1997
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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
Subject: Employment, Income tax systems, Labor, Social security contributions, Taxes, Unemployment, Wages
Keywords: employer, employer Social Security tax reduction, Employment, employment creation, employment effect, employment effects of reduction, Global, Income tax systems, labor, labor cost of skilled workers, labor income, Laffer Curve, net wage, rate of return constraint, rate of return test, replacement ratio, social security, Social security contributions, Social Security tax reduction, Tax policy, Unemployment, wage, Wage Curve, Wages, worker, WP
Pages:
29
Volume:
1997
DOI:
Issue:
059
Series:
Working Paper No. 1997/059
Stock No:
WPIEA0591997
ISBN:
9781451966008
ISSN:
1018-5941
