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- Title
Labour Taxes, Market Size and Productivity Growth.
- Authors
Ferraro, Domenico; Ghazi, Soroush; Peretto, Pietro F
- Abstract
How do changes in labour taxes affect innovation and aggregate productivity growth? To answer this question, we propose a quantitative, general equilibrium growth model featuring product and quality innovation with endogenous market structure, estimate its parameters and provide empirical validation for the propagation mechanism of labour tax changes. We find that a temporary cut in flat-rate labour taxes produces a growth acceleration in aggregate productivity, permanently increasing the path of real GDP per capita. Moreover, such permanent gains are sizeable even without long-run growth effects.
- Subjects
LABOR productivity; ENDOGENOUS growth (Economics); MARKET design &; structure (Economics); TAXATION; INDUSTRIAL productivity
- Publication
Economic Journal, 2023, Vol 133, Issue 654, p2210
- ISSN
0013-0133
- Publication type
Article
- DOI
10.1093/ej/uead028