Efficiency wages, employment, and the marginal income-tax rate: A note |
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Authors: | Clemens Fuest Bernd Huber |
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Affiliation: | (1) Present address: Staatswirtschaftliches Institut, Universität München, Ludwigstrasse 28, III VG, D-80539 München, Germany |
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Abstract: | In the framework of an efficiency-wage model, Hoel [Journal of Economics (1990) 51: 89–99] argues that a reduction in the marginal income-tax rate reduces employment. The present note shows that this result depends on how the tax reform is assumed to change the burden per worker. If the tax payment per worker is held constant, it cannot be ruled out that a lower marginal tax rate leads to an increase in employment. |
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Keywords: | taxation unemployment |
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