On Substituting Consumption Taxes for Unemployment Insurance Contributions to Reduce Unemployment

The German conservative party (consisting of two sister parties) planned in case of victory in the national election on 18 September 2005 to reduce the unemployment insurance contributions by 2 percent and to finance this with an increase in the consumption tax by 2 percent. The present paper shows in a Layard-Nickell-Jackman type wage bargaining model that this tax reform does not reduce unemployment; neither in the short to medium run, nor in the long run. When there is short-to-medium-run real wage resistance, then in the short to medium run unemployment depends on the overall tax burden, but not on the composition of the tax burden. In the long run the wage setting curve is vertical and hence in the long run unemployment is even invariant of the overall tax burden.Consumption taxes, unemployment insurance contributions, payroll taxes. wage bargaining, unemployment.

Youth Dependency, Institutions, and Economic Growth

The present paper shows empirically that the youth dependency ratio (the population below working age divided by the population of working age) reduces economic growth even after controlling for institutions. The institutional variable, the paper controls for, is the measure for institutions that is recently preferred in prominent work by Acemoglu and co-authors. Institutions turn out to have a significant and positive effect on economic growth. The significance of the youth dependency ratio and of institutions appears to be robust to controlling for various variables, including malaria prevalence. Hence, the paper finds evidence that demography, as well as institutions, both matter for economic growth.Economic Growth; Fertility; Age structure effects.

An explanation of the positive correlation between fertility and female employment across Western European countries

Recent literature shows the puzzling result of a positive and significant cross-country correlation between the total fertility rate and the female labour force participation rate across Western European countries. The present paper shows that this cross-country correlation becomes negative and significant, once one corrects the total fertility rate for a distortion, caused by an increasing age of childbearing, and controls in cross-country regressions for purchased child care use and female long-term unemployment. This result survives an empirical analysis in which the female labour force participation rate is treated as an endogenous variable.Total fertility rate; female labour force participation rate; purchased child care; female unemployment.

Swedish Family Policy, Fertility and Female Wages

Recent demographic literature shows in Swedish micro-level data a positive effect of female wage income or female education on fertility. The literature explains this finding with Swedish family policies of high subsidies for bought-in child care and generous parental leave benefits that are calculated on the basis of a woman's prior wage income. Both policies would cause the substitution effect from an increase in female wages on fertility to be dominated by its income effect. This paper shows within an economic model that there are offsetting effects from Swedish family policy that cause the reduction in the magnitude of the substitution effect of female wages to be most likely rather small.Fertility; family policy; gender equality.

Agricultural productivity growth and escape from the Malthusian trap

Industrialization allowed the industrialized world of today to escape from a regime characterized by low economic and population growth and to enter a regime of hihg economic and population growth. To explain this transion of regime, we construct a two-sector growth model with endogenous fertility and endogenous technological progress in the manufacturing sector. With this structure our model is able to replicate the stylized facts of the British industrial revolution. In addition, we show that industrialization requires rising growth of agricultural total factor productivity. This result is in marked contrast to previous work within a similar framework - but with a constant population - wich came to the conclusion that industrialization requires merely a rising level of agricultural total factor productivity. We conclude by illustrating that our proposed model framework can be extended to also include the demographic transition, i.e., a regime where economic growth may lead to decreasing fertility. (AUTHORS)Malthusian theory, demographic transition, economic growth, population growth

On the Relation between Discounting of Climate Change and Edgeworth-Pareto Substitutability

To justify substantial carbon emission reductions, recent literature on cost-benefit analysis of climate change suggests discounting environmental quality at a lower discount rate than the standard consumption discount rate. Recent literature also shows that a theoretical foundation for such a lower environmental discount rate requires rising willingness-to-pay for environmental quality (WTP). A widely believed better alternative is however to adjust instead future environmental benefits for rising WTP and to discount those benefits at the consumption discount rate. According to this latter approach, rising WTP is usually assumed not to change the consumption discount rate itself. Assuming environmental resource scarcity, the present paper shows that an unchanged consumption discount rate is however, by and large, only an appropriate assumption in the knife-edge case in which environmental quality and goods consumption are neither substitutes nor complements in the Edgeworth-Pareto sense (substitutes, respectively, complements in the Edgeworth-Pareto sense implies the marginal utility of goods consumption to be decreasing, respectively, increasing in environmental quality)

The effects of age structure on economic growth: An application of probabilistic forecasting to India

During recent years there has been an increasing awareness of the explanatory power of demographic variables in economic growth regressions. We estimate a new model of the effects of age structure change on economic growth. We use the new model and recent probabilistic demographic projections for India to derive the uncertainty of predicted economic growth rates caused by the uncertainty in demographic developments

The Social Cost of Carbon on an Optimal Balanced Growth Path

This paper derives analytically the growth rate of the social cost of carbon (SSC) on an optimal balanced growth path. More specifically, the paper examines a deterministic Ramsey model of optimal economic growth with carbon emissions. In this model, restrictions on technology and preferences are imposed that guarantee optimal balanced growth, i.e., that guarantee an optimal path with constant and positive economic growth and a constant stock of carbon in the atmosphere. The paper exploits these restrictions to show that the growth rate of the SCC on the optimal balanced growth path is negative, provided the elasticity of marginal utility of consumption with respect to consumption is larger than or equal to one. There seems to be consensus in the literature that this latter requirement is fulfilled in reality

On the Relation between Dual-Rate Discounting and Substitutability

To justify substantial emission reductions, recent literature on cost-benefit analysis of climate change suggests discounting environment consumption with an environmental discount rate instead of a consumption discount rate that is usually used in cost-benefit analysis. The present study clarifies that whether or not this dual-rate discounting approach succeeds in justifying substantial emission reductions depends on whether or not environment and goods consumption are substitutes in the Hicks-Allen sense and in the Edgeworth-Pareto sense (substitutes in the Hicks-Allen sense implies the Hicksian goods demand to be increasing in the relative price of environmental goods, while substitutes in the Edgeworth-Pareto sense implies the marginal utility of goods consumption to be decreasing in environment consumption). Moreover, a low intratemporal elasticity of substitution between environment and goods consumption within a period contributes to a low environmental discount rate in comparison to the consumption discount rate, while a low intertemporal elasticity of substitution between composite consumption of different periods contributes to declining discount rates over time