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This volume presents Richard Blundell's outstanding research on the modern economic analysis of labor markets and public policy reforms. Professor Blundell's hugely influential work has enhanced greatly our understanding of how individuals' behavior on the labor market respond to taxation and social policy influence. Edited by IZA, this volume brings together the author's key papers, some co-authored and some unpublished, with new introductions and an epilogue. It covers some of the main research insights in the study of labor supply. The question of how individuals adapt their behavior in response to policy changes is one of the most investigated topics in empirical labor and public economics. Do people reduce their working hours if governments decide to raise taxes? Might they even withdraw completely from the labor market? Labor supply estimations are extensively used for various policy analyses and economic research. Labor supply elasticities are key information when evaluating tax-benefit policy reforms and their effect on tax revenue, employment, and redistribution. The chapters cover empirical and theoretical developments as well as applications to tax and welfare reform, and each represents a substantive research contribution from Blundell's publications in top research outlets.
Other chapters examine the effects of tax reforms, including the Earned Income Tax Credit, and the wage-increasing effects of progressive income taxes in a highly unionized labor market. Finally, the contributors analyze the effects of employment protection and tax penalties on the growth of the underground economy. The insights offered in these studies will be valuable to the policy analyst as well as to the academic theorist
Kemmerling deftly intertwines the efficiency theory of taxation with the political basis of taxing the working poor. . . This commendable effort in interdisciplinary study and the comparative analysis of taxation is an essential reference for undergraduate and graduate students, as well as faculty and professionals of economics, political science, and taxation systems of Europe. S. Chaudhuri, Choice Taxing the Working Poor is an inspiring read for political scientists and economists interested in the relationship between taxation and employment. Based on an elegant combination of econometric analysis and historical case studies, it shows that the alleged trade-off between employment and progressive taxation has political rather than economic roots. Philipp Genschel, Jacobs University Bremen, Germany What are the economic and political forces which generate different regimes of tax on labour? What are the implications for the labour market of these different regimes? And does globalisation bring a halt to tax-based redistribution? Achim Kemmerling tackles these and other important questions in this significant book. Malcolm Sawyer, University of Leeds, UK We have been distracted from the detailed problems of financing the welfare state by the tired old twentieth-century debate between libertarian tax minimisers and maximal socialist collectivisers. We have to move on. The welfare state has to be accepted and the detailed problems of taxation to sustain it have to be addressed. This well-researched and fascinating book addresses the political and institutional origins of different tax systems and points to viable strategies of redistribution and reform. Geoffrey M. Hodgson, University of Hertfordshire, UK In most industrialized countries the tax burden of poor people has increased dramatically over the last few decades. This book analyses both the political origins of this increase and its consequences for the labour market. Achim Kemmerling illustrates that tax-based redistribution and employment are not incompatible, and that the shift away from redistribution has not occurred on grounds of economic efficiency. He goes on to show that a long-term shift from capital to labour taxation has provoked conflicts of interests between workers that have weakened the political cause of tax-based redistribution. This interdisciplinary account of the political economy of taxing low wages explains the historical and structural origins of political tensions between different types of workers and their effects on the performance of labour markets. As such, it will strongly appeal to a wide-ranging audience, including academics, students and researchers with a special interest in political science, political economy, labour markets and the economics of taxation. Practitioners in the field of labour market, social and tax policies interested in the normative consequences of taxation for the labour market will also find the book to be of great interest.
This paper examines the impact of fiscal policy on employment through the lenses of Okun’s Law. Looking at the panel of OECD countries over the past three decades, we find that fiscal policy can affect employment beyond the impact it is traditionally assumed to exert through the output multiplier. In particular, this impact is found to be effective for most items of current discretionary expenditure and for corporate income taxes and social security contributions. Okun’s Law is found to be stable under almost all model specifications, but higher spending on subsidies and lower social security contributions can amplify the impact of the output gap on employment gaps.
This publication examines the effects of taxation on employment, highlights the resulting policy challenges, and discusses the ways governments endeavour to address these challenges.
This chapter has set out in detail the models which are employed below in order to analyse the labour market effects of changes in tax rates and in alterations in the tax structure. The fundamental mechanisms underlying the different approaches have been pointed out. Moreover, vital assumptions have been emphasised. By delineating the models which are used for the subsequent analyses, implicitly statements have also been made about topics or aspects which this study does not cover. For example, all workers and firms are identical ex ante. However, ex-post differences are allowed for, inter alia, if unemploy ment occurs or if some firms have to close down. These restrictions indicate areas of future research insofar as that the findings for homogeneous workers or firms yield an unambiguous proposal for changes in tax rates or the tax structure in order to promote employment. This is because it would be desir able for tax policy to know whether the predicted effects also hold in a world with ex-ante heterogeneity. Furthermore, the product market has not played a role. Therefore, repercussions from labour markets outcomes on product demand - and vice versa - are absent. 55 Moreover, neither the process of capital accumulation, be it physical or human capital, nor substitution pos sibilities between labour and capital in the firms' production function are taken into account. Finally, international competition is not modelled.
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