Layoff taxes and minimum wage: Two complementary public policies |
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| Authors: | Frédéric Gavrel Isabelle Lebon Thérèse Rebière |
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| Affiliation: | 1. Department of Economics, Uppsala University, Uppsala Center for Fiscal Studies, Box 513, SE-751 20 Uppsala, Sweden;2. Institute for Evaluation of Labour Market and Education Policy (IFAU), SE-751 20 Uppsala, Sweden |
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| Abstract: | In a matching model in which the job destruction rate and the output are endogenous, we show that the presence of a binding minimum wage prompts firms to choose too risky jobs. Introducing layoff taxes therefore reduces unemployment and improves market efficiency. |
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