TY  - RPRT
        AU  - Burda, Michael C.
AU  - Weder, Mark
        TI  - Payroll Taxes, Social Insurance and Business Cycles
        PY  - 2010/Aug/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 5150
        UR  - https://www.iza.org/index.php/publications/dp5150
        AB  - Payroll taxes represent a major distortionary influence of governments on labor markets. This paper examines the role of payroll taxation and the social safety net for cyclical fluctuations in a nonmonetary economy with labor market frictions and unemployment insurance, when the latter is only imperfectly related to search effort. A balanced social insurance budget renders gross wages more rigid over the cycle and, as a result, strengthens the model's endogenous propagation mechanism. For conventional calibrations, the model generates a negatively sloped Beveridge curve as well as substantial volatility and persistence of vacancies and unemployment.
        KW  - consumption-tightness puzzle
KW  - unemployment
KW  - payroll taxes
KW  - labor markets
KW  - business cycles
        ER  -