Relative Effects of Labour Taxes and Unemployment Benefits on Hours Worked Per Worker and Employment

Been Lon Chen; Mei Hsu; Chih Fang Lai

doi:10.1111/1468-0106.12107

Relative Effects of Labour Taxes and Unemployment Benefits on Hours Worked Per Worker and Employment

Been Lon Chen, Mei Hsu, Chih Fang Lai

Department of Business Administration

Research output: Contribution to journal › Article › peer-review

2 Citations (Scopus)

Abstract

Over the past 3 decades, labour supply in Europe has declined by approximately 30% relative to the USA. The decline comes from hours per worker and employment. The present paper uses a matching model to study the effects of labour taxes and unemployment benefits. Labour taxes decrease hours and employment, with overstated adverse effects on hours if extensive margins are not considered. Unemployment benefits decrease employment and increase hours, with understated adverse effects on employment if intensive margins are not considered. In the baseline parameterization, labour taxes and unemployment benefits together explain approximately 75% of the declining labour supply in Europe relative to the USA.

Original language	English
Pages (from-to)	282-309
Number of pages	28
Journal	Pacific Economic Review
Volume	20
Issue number	2
DOIs	https://doi.org/10.1111/1468-0106.12107
Publication status	Published - 2015 May 1

ASJC Scopus subject areas

Geography, Planning and Development
Development
Aerospace Engineering

UN SDGs

This output contributes to the following Sustainable Development Goal(s)

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10.1111/1468-0106.12107

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AB - Over the past 3 decades, labour supply in Europe has declined by approximately 30% relative to the USA. The decline comes from hours per worker and employment. The present paper uses a matching model to study the effects of labour taxes and unemployment benefits. Labour taxes decrease hours and employment, with overstated adverse effects on hours if extensive margins are not considered. Unemployment benefits decrease employment and increase hours, with understated adverse effects on employment if intensive margins are not considered. In the baseline parameterization, labour taxes and unemployment benefits together explain approximately 75% of the declining labour supply in Europe relative to the USA.

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Relative Effects of Labour Taxes and Unemployment Benefits on Hours Worked Per Worker and Employment

Abstract

ASJC Scopus subject areas

UN SDGs

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