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Article dans une revue International Tax and Public Finance Année : 2018

The Magic of Layoff Taxes Requires Equilibrium Stability


In the same vein as Blanchard and Tirole (2008) First Pass, this note shows that, under the condition for equilibrium stability, the partial implementation of layoff taxes invariably increases firms' profits as well as workers' utilities by lowering payroll taxes. It also proves that requiring stability does not raise any equilibrium existence issue per se: since the budget constraint of unemployment compensation induces multiple equilibria, the condition for stability simply permits the selection of one of these equilibria. These insights could favor the introduction of firing taxes, which in practice would probably be a gradual process
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halshs-01462917, version 1 (09-02-2017)
halshs-01462917, version 2 (09-05-2017)



Frédéric Gavrel. The Magic of Layoff Taxes Requires Equilibrium Stability. International Tax and Public Finance, 2018, 25 (2), pp.404-411. ⟨10.1007/s10797-017-9459-y⟩. ⟨halshs-01462917v2⟩
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