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The Wedge
Author(s) -
Goerke Laszlo
Publication year - 2000
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/1467-9957.00221
Subject(s) - social security , economics , unemployment , wage , assertion , labour economics , compensation (psychology) , wedge (geometry) , market economy , macroeconomics , psychology , computer science , psychoanalysis , programming language , physics , optics
It is often argued that the quantity that is traded on the market is independent of the side of the market which is taxed. However, this assertion need not hold, especially in imperfectly competitive markets such as that for labour. Taking an efficiency wage economy as an example, it is shown that the legal incidence of social security contributions will affect the economic incidence if unemployment compensation is subject to social security contributions. Since this is the case in numerous OECD countries, the wedge between producer costs and the net wage might be an inappropriate device for measuring the impact of social security contributions on wages and employment.