Payroll Taxes, Social Insurance and Business Cycles

Time: 2011, Thursday May 12, 13.00-14.00 hours
Location: CPB-office, Van Stolkweg 14, The Hague

NOTE: Although on Thursday, this is an academic seminar, not a policy seminar!

Presentation: Michael Burda (Humboldt University Berlin)

Discussant: Sander van Veldhuizen (CPB)

Language: English

Registration:  Please register by sending an email to seminars@cpb.nl.

Abstract subject: Payroll taxes represent a major distortionary influence of governments on labor markets. This paper examines the role of payroll taxes and the social safety net for cyclical fluctuations in a non-monetory economy with labor market frictions and unemployment insurance, when the latter is only imperfectly related to search effort. A balanced social insurance budget renders gross wages more rigid over the cycle and, as a result, strengthens the model's endogenous propagation mechanism. For conventional calibrations, the model generates a negatively sloped Beveridge curve as well as substantial volatility and persistence of vacancies and unemployment.

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