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Cover of: Reducing Social Contributions for Unskilled Labor as a Way of Fighting Unemployment: An Empirical Evaluation for the Case of Spain
Antonio G. Gómez-Plana, Oscar Bajo-Rubio

Reducing Social Contributions for Unskilled Labor as a Way of Fighting Unemployment: An Empirical Evaluation for the Case of Spain

Section: Articles
Volume 60 (2004) / Issue 2, pp. 160-185 (26)
Published 09.07.2018
DOI 10.1628/0015221041525741
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  • 10.1628/0015221041525741
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Summary
We provide an empirical evaluation of the effects of a cut in social security contributions (i) for all types of labor and (ii) only for unskilled labor, within a computable generalequilibrium model simulation of the Spanish economy. The model allows firms to follow a noncompetitive price rule, and incorporates an equal-yield assumption, which means that the reduction in social security contributions is compensated with an increase in value-added tax rates, so the public-sector deficit is not affected. In addition, the labor market is assumed to follow a matching unemployment rule, which allows us to model in a simple way any frictions present in that market.