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Payroll taxes in Sweden were reduced substantially for people ages 26 years or younger on July 1, 2007. The objective of this tax cut was to lower youth unemployment. The question of how gains from payroll taxes are distributed between workers and owners of firms has been the focus of considerable theoretical and empirical attention. This paper examines the impact of the Swedish reform on firm profits using individual-level and firm-level microdata. Previous investigations into the effects of this particular reform have focused entirely on the effects on employment and wages, or have been limited to the retail sector. This paper finds that the reform was not associated with a general increase in firm profitability, but that there is some evidence of a positive effect on profits in the retail and wholesale sector.

Firm Profitability --- Incidence --- Payroll Taxes

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This paper evaluates the impact of market-oriented structural reforms, in particular labor market policies, social assistance programs, and trade liberalization on long run unemployment, wage inequality, and the distribution of employment across sectors in a small open economy with search frictions and idiosyncratic productivity shocks. The paper builds a search and matching model of a labor market with a large informal sector and estimates the model using Colombian household-level data. Changes in labor taxes may have sizable aggregate, compositional, and distributional effects if workers associate high payroll taxes with more valuable and efficient social security services. The higher is the valuation of the services, the higher is the reduction in the log-wage gap. An expansion of public health insurance to informal sector workers has minor aggregate and distributional effects. Changes in relative prices that negatively affect the relative profitability of the formal sector have quite sizable aggregate effects, producing more long-run unemployment and informality, and increasing unemployment duration.

Developing Economy --- Employment and Unemployment --- Health Care Services Industry --- Industry --- Informality --- Labor Markets --- Payroll Taxes --- Rural Development --- Rural Labor Markets --- Social Protections and Labor --- Subsidized Health --- Unemployment --- Wage Inequality

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In this paper the authors use a search and matching model of multi-sector labor markets, to understand the channels through which economic shocks affect labor market outcomes in developing countries. In the model workers can be employed in agriculture, formal or informal urban jobs, or unemployed. Economic shocks are manifested as either increased turbulence in the formal/informal sectors or a decrease in overall sectoral productivity. By calibrating the model to Indonesia and Mexico, the authors are able to understand how the 1998 Indonesian crisis and the 2001 Mexican recession translated into labor market outcomes. They then venture to simulate how the current financial crisis might affect the allocation of labor and earnings across sectors, in these countries. The results suggest that in both countries past crises have increased the degree of turbulence of the formal sector, increasing job destruction. However, while in Indonesia the crisis affected the overall formal sector productivity, this was not the case in Mexico. This explains the larger blow to formal wages - relative to the size of the shock- witnessed by Indonesian workers. The response of the informal sector was also different: In both countries the informal sector was able to act as a buffer, as relative earnings increased. However, while in Mexico it became much harder to find informal sector opportunities and easier to keep the job once found; in Indonesia turbulence in the informal sector increased substantially increasing the job destruction rate of informal jobs and limiting the cushioning role that the informal sector might have played. The agricultural sector was spared from the shock in both countries. In Indonesia, it actually benefited from an unusual exogenous increase in the price of rise. The simulations show that if either the informal or agricultural sectors are spared from the shocks, large reallocations of labor might occur, and the overall effect of the shock is smaller. Instead, if these sectors can't buffer the shock, the reallocation of labor is much smaller, but earnings in the formal sector drop substantially. The authors also explore the impact of alternative policies. They find that in relatively flexible markets where informality can be seen more as a choice rather than as queuing, unemployment benefits and informal employment subsidies may have paradoxical effects, by discouraging formal search. Instead, policies targeted at creating informal employment and boosting formal TFP growth have the desired effects.

Average wages --- Banks & Banking Reform --- Economic Shocks --- Economic Theory & Research --- Employment subsidies --- Finance and Financial Sector Development --- Human capital --- Informal employment --- Informal sector --- Job creation --- Job destruction --- Job destruction rate --- Jobs --- Labor Market --- Labor Market Outcomes --- Labor Markets --- Labor Policies --- Macroeconomics and Economic Growth --- Manufacturing wages --- Markets and Market Access --- Payroll taxes --- Public employment --- Social Protections and Labor --- Unemployed --- Unemployment --- Unemployment benefits --- Workers

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Macroeconomics would not be what it is today without Edmund Phelps. This book assembles the field's leading figures to highlight the continuing influence of his ideas from the past four decades. Addressing the most important current debates in macroeconomic theory, it focuses on the rates at which new technologies arise and information about markets is dispersed, information imperfections, and the heterogeneity of beliefs as determinants of an economy's performance. The contributions, which represent a breadth of contemporary theoretical approaches, cover topics including the real effects of monetary disturbances, difficulties in expectations formation, structural factors in unemployment, and sources of technical progress. Based on an October 2001 conference honoring Phelps, this incomparable volume provides the most comprehensive and authoritative account in years of the present state of macroeconomics while also pointing to its future. The fifteen chapters are by the editors and by Daron Acemoglu, Jess Benhabib, Guillermo A. Calvo, Oya Celasun, Michael D. Goldberg, Bruce Greenwald, James J. Heckman, Bart Hobijn, Peter Howitt, Hehui Jin, Charles I. Jones, Michael Kumhof, Mordecai Kurz, David Laibson, Lars Ljungqvist, N. Gregory Mankiw, Dale T. Mortensen, Maurizio Motolese, Stephen Nickell, Luca Nunziata, Wolfgang Ochel, Christopher A. Pissarides, Glenda Quintini, Ricardo Reis, Andrea Repetto, Thomas J. Sargent, Jeremy Tobacman, and Gianluca Violante. Commenting are Olivier J. Blanchard, Jean-Paul Fitoussi, Mark Gertler, Robert E. Hall, Robert E. Lucas, Jr., David H. Papell, Robert A. Pollak, Robert M. Solow, Nancy L. Stokey, and Lars E. O. Svensson. Also included are reflections by Phelps, a preface by Paul A. Samuelson, and the editors' introduction.

Macroeconomics --- Economists --- Congresses --- Phelps, Edmund S. --- 330.101 --- AA / International- internationaal --- 330.00 --- 338.020 --- 330.01 --- 339 --- -Macroeconomics --- -Economics --- Social scientists --- Economische analyse. Economische methodologie. Economische onderzoeksmethoden--(theoretische economie) --- Economische en sociale theorieën: algemeenheden. --- Theorie van de arbeid. --- Theorie van het economisch evenwicht. --- Phelps, E. S. --- -Economische analyse. Economische methodologie. Economische onderzoeksmethoden--(theoretische economie) --- 330.101 Economische analyse. Economische methodologie. Economische onderzoeksmethoden--(theoretische economie) --- -330.101 Economische analyse. Economische methodologie. Economische onderzoeksmethoden--(theoretische economie) --- Economische en sociale theorieën: algemeenheden --- Theorie van het economisch evenwicht --- Theorie van de arbeid --- Makroökonomie. --- Theorie --- Wachstumstheorie --- Theorie der Arbeitslosigkeit --- Rationale Erwartung --- Unvollkommene Information --- Inflationstheorie --- Konjunkturtheorie --- Makroökonomik --- Makroökonomie --- Argentina. --- Baxter-Stockman puzzle. --- Browning, M. --- Canada, investment in. --- Carlstrom, C. --- Dixit-Stiglitz model. --- Drazen, A. --- Finland, unions in. --- Friedman, Milton. --- Internet usage. --- Olson, Mancur. --- accelerationist Phillips curve. --- advertising expenditures. --- anonymity. --- assessment variables. --- average opinion. --- balanced growth path (BGP). --- bankruptcy. --- behavioral economics. --- belief structure. --- channel capacities. --- common knowledge. --- constant-gain algorithm. --- debt puzzle. --- disability benefits. --- disequilibrium. --- efficiency wages. --- electricity. --- entrepreneurial thesis. --- equity premium puzzle. --- excess returns puzzle. --- exponential discount functions. --- financial accelerator. --- geographic mobility. --- habit formation. --- higher-order beliefs. --- hyperbolic time preferences. --- hyperinflation. --- imperfect knowledge. --- incentive wages. --- infinite-regress problem. --- inflation inertia. --- inflation models. --- job satisfactions. --- job-training programs. --- labor market model. --- learning models. --- matching theory. --- microfounded models. --- monetary equilibrium. --- money neutrality. --- natural rate hypothesis. --- neoclassical growth model. --- new classical macroeconomics. --- owner-occupied housing. --- payroll taxes. --- Economists - United States - Congresses --- Macroeconomics - Congresses --- Makroökonomik --- Makroökonomische Theorie --- Wirtschaftstheorie