Pareto-Improving Unemployment Policies

34 Pages Posted: 18 Oct 2006

See all articles by Jörg Lingens

Jörg Lingens

University of Regensburg - Department of Economics and Econometrics

Klaus Wälde

University of Mainz; CESifo (Center for Economic Studies and Ifo Institute); UCL at Louvain la Neuve

Date Written: September 2006

Abstract

We investigate how continental European unemployment can be reduced without reducing unemployment benefits and without reducing the net income of low-wage earners. Lower unemployment replacement rates reduce unemployment, the net wage and unemployment benefits. A lower tax on labour increases net wages and - for certain benefit-systems - unemployment benefits as well. Combining these two policies allows to reduce unemployment in countries with "net-Bismarck" and Beveridge systems without reducing net income of workers or of the unemployed. Such a policy becomes self-financing under realistic parameter constellations when taxes are reduced only for low-income workers.

Keywords: inequality, unemployment, taxation, policy reform

JEL Classification: J38, J51, H23, E60

Suggested Citation

Lingens, Jörg and Wälde, Klaus, Pareto-Improving Unemployment Policies (September 2006). CESifo Working Paper Series No. 1807, Available at SSRN: https://ssrn.com/abstract=938370

Jörg Lingens

University of Regensburg - Department of Economics and Econometrics ( email )

Universitaetsstrasse 31
D-93040 Regensburg
Germany

Klaus Wälde (Contact Author)

University of Mainz ( email )

Mainz School of Management and Economics
Mainz, 55128
Germany
+49 6131 3920143 (Phone)

HOME PAGE: http://www.waelde.com

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

UCL at Louvain la Neuve

Place Montesquieu, 3
Louvain-la-Neuve, 1348
Belgium

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