Labor Tax Cuts and Employment: A General Equilibrium Approach for France
IMF Working Papers, July 1, 2014
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- Labor Tax Cuts and Employment: A General Equilibrium Approach for France
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Bibliographic details
- Authors: Raphael A Espinoza, Esther Perez Ruiz
- Published: July 1, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498328197.001
Model and methodology
- Presents a simple supply side, general equilibrium model to estimate the macroeconomic effects of labor tax cuts.
- Production factors: capital, unskilled workers, skilled workers, and public servants.
- Wage formation:
- Skilled workers: Blanchflower-Oswald wage curve.
- Unskilled workers: labor supply is very elastic around the minimum wage for small changes in employment.
- Model calibration: calibrated for France.
- Scope limitation: model abstracts from demand side effects; results should be interpreted as estimates of effects on potential output and potential employment.
Policy reforms analyzed
- Crédit d’Impôt pour la Compétitivité et l’Emploi (CICE).
- Pacte de Solidarité Responsabilité (RSP).
Key quantitative findings
- If the tax cuts are not offset by other fiscal measures:
- Short run employment effect: around 200,000 jobs.
- Long run employment effect: 600,000 jobs.
- These estimates reflect effects on potential output and potential employment given the supply-side model.
Subject areas and keywords emphasized
- Subject: Employment, Labor, Labor costs, Labor taxes, Public employment, Taxes, Wages
- Keywords: CICE, crédit d’impôt pour la compétitivité et l’emploi, differential wage elasticities to unemployment, differential wage elasticity, Employment, employment outcome, labor cost, labor cost reductions, Labor costs, labor demand function, labor income, labor tax wedge, Labor taxes, minimum wage, pacte de responsabilité, Public employment, rate of return, Responsibility Pact, social security contributions, spending cut, supply curve, wage, wage curve, wage distribution, Wages, WP
Labor Tax Cuts and Employment: A General Equilibrium Approach for France, Raphael A Espinoza, and Esther Perez Ruiz (IMF Working Papers 2014, 114).
Content in this bundle
- _wp14114 - Appendix A