Taxation and unemployment:: an applied general equilibrium approach

We present an applied general equilibrium (AGE) modelling approach to analyse employment and unemployment effects of labour tax cuts in an economy where wages are determined through firm-union bargaining at the sectoral level. In such a labour market regime, simulations for Germany show that labour tax policies can make only a small contribution to alleviating the problem of persistent unemployment. (C) 2004 Elsevier B.V. All rights reserved.