Reductions In Social Security Contributions Research Articles

Central Banks Respond to COVID-19 to Stave off a Financial Crisis, They Need for Targeted Fiscal Measures Should not Be Understated

Central Banks have cut interest rates to historic lows in an attempt to reduce the adverse impact of COVID-19, while unprecedented liquidity infusions have been used to reduce funding constraints and frictions in the financial market. Monetary policy will lessen the economic and financial fallout from the virus, policymakers should emphasise the need for targeted fiscal measures to complement accommodative monetary policy and central bank liquidity. These should culminate fiscal transfers, wage subsidies and a significant reduction in social security contributions for households. Nevertheless, central banks should begin stemming structural vulnerabilities in financial markets and ensure that liquidity infusions are a short-term measure designed to improve the transmissions of monetary policy rather than create financial market dependence, as has been the case since the financial crisis. The Coronavirus or COVID-19 has caused the global economy to grow at a slower pace, government yields have tumbled and liquidity constraints have increased in financial markets across advanced economies. Prior to this, the United States and China were locked in a geopolitical, economic and technological rivalry that caused a synchronized cyclical slowdown as businesses to postpone investment decisions. This trend of slowing capital investments into productive sectors such as green technology and renewable energy saw productivity wane, and global woes were compounded by Brexit amidst sluggish growth in the single market. Following the signing of a phase one of the trade agreement and the USMCA, COVID-19 began to spread in Wuhan, the capital of Hubei province. Since then, the virus has spread to Italy, North America and Africa. In the meantime, global manufacturing supply chains for cosmetics, the auto sector, consumer and industrial products stalled, business and consumer sentiment plummeted in some advanced economies and the service sector spanning tourism, transportation, restaurants have been adversely affected by the virus. Central Banks can assess the impact of the Coronavirus from two standpoints.

The effect of welfare payments on work: Regression discontinuity evidence from Ecuador

We study the impact of welfare payments in Ecuador on the probability that adults work, and on whether they are employed in the formal or informal sectors. Our identification strategy exploits the fact that welfare was limited to individuals below a cutoff value on a household “poverty score”. We find no evidence that transfers discouraged work. However, among women, welfare payments led to reductions in social security contributions (which are mandated for salaried workers), although the magnitude of these effects is small.

On the Optimal Use of Revenues from a CO2 Tax and the Importance of Labor Market Conditions

<em>This paper focuses on the environmental, economic and budgetary impacts of a carbon tax in the presence of mixed recycling strategies and a detailed modelling of labor market conditions, both employment and involuntary unemployment. This focus matches the terms of the policy debate in many small energy-importing economies. The revenue-recycling policies that appear most promising are those that use carbon tax revenue to finance investment tax credits, reductions in social security contributions and reductions in personal income taxes. Although none of these mechanisms would individually lead to simultaneous improvements in the three margins, a mixture of the three would. Our sensitivity analysis suggests that labor markets conditions are a critical factor in determining the possibility of generating these positive effects. Ignoring labor supply responses, employment and unemployment effects leads to systematic underreporting of the three dividends and thereby undermines the political viability of environmental tax reform. </em>

Self-insurance and multi-peril grassland crop insurance: the case of French suckler cow farms

Purpose – From the perspectives of the probable replacement of the national calamity funds by multi-peril grassland insurance, the purpose of this paper is to estimate demand for grassland production insurance. Design/methodology/approach – A discrete stochastic programming model with a three-year planning horizon was used to run simulations for farms raising suckler cows primarily with grasslands. In this model, the annual area insured and some production decisions are optimized under grasland yield uncertainty, with possible ex post production-system adjustments. The effects of insurance loading cost (14 levels), insurance coverage level (three levels), risk aversion (two levels) and stock levels (forage and animal stocks vary according to grassland yields and to farm management of the previous years) were analyzed. Findings – The results show that grassland insurance could be used as a flexible risk management tool, when farm becomes vulnerable to fodder shortfall. According to previous years’ grassland yields and to the subsequent states of hay stock and animal liveweight, the area insured could vary between nearly the none and full. Farmers with low-average stocking rate and important hay storage capacity have less incentive to buy grassland insurance. The author also demonstrates that for a given loading cost, more insurance is purchased at a coverage level of 70 percent of average yield than at higher coverage levels. The cost of self-insurance increases for important and rare losses while multi-peril grassland insurance premium decreases. Higher levels of risk aversion also raise the quantity of insurance subscribed. Eventually, insurance price is a key factor. Almost no insurance is bought for loading costs greater than 1.1 under low-risk aversion and for loading costs greater than 1.3 under moderate risk aversion. Research limitations/implications – The willingness to pay for insurance could have been overestimated for different reasons. First, basis risks have not been introduced in the simulation framework. Although the Forage Production Index performed quite well, basis risks are high enough to trigger inappropriate indemnifications in some cases. Consequences of these risks should be estimated in further research. Second, other self-insurance options and public emergency measures such as subsidized loan or reduction in social security contributions should also be considered to assess and reduce farmers vulnerability to risks. Practical implications – The launching of the multi-peril grassland insurance is likely to be successful thanks to the 65 percent of public subsidies on insurance premiuml. However, considering that the loading cost is likely to be high and that demand for grassland production insurance is rather low, multi-peril grassland production insurance may struggle to continue unsubsidized. Originality/value – This paper provides a framework that enables to estimate demand for grassland production insurance factoring in substitution with self-insurance and taking into account successive risks.

Employment effects of tax cuts in a transition country: evidence from Serbia

During the years preceding the current crisis Serbia had relatively high GDP growth rates. It seems, however, that these growth rates did not have much impact on the employment growth rate, which has been rather low and even negative since 2000. Given that there is quite a high tax wedge in the country, we analyse the impact of labour tax cuts through a reduction in social security contributions on the employment rate for workers of different skill types. Results show that tax shifting is higher, that is, wages will increase more as a result of reduced social contributions for high-skilled than for low-skilled workers. From a policy perspective our results indicate that it could be more effective to focus on selective tax reductions instead of applying across-the-board tax cuts.

La incentivación del empleo de las personas con discapacidad en el medio ordinario de trabajo

El artículo constituye un examen crítico de los principales incentivos a la contratación de personas con discapacidad en el mercado ordinario de trabajo, es decir, las bonificaciones en materia de Seguridad Social y las subvenciones por contratación, a la luz del nuevo Texto Refundido de Ley General de derechos de las personas con discapacidad y de su inclusión social (Real Decreto Legislativo 1/2013) y de la Estrategia de Acción para el Empleo de las Personas con Discapacidad 2008-2012. Son objeto de análisis la normativa y la jurisprudencia dictada al efecto. En el artículo se analiza el alcance cuantitativo de las bonificaciones, los contratos beneficiados y el régimen jurídico de las exclusiones legales que pueden impedir su disfrute. En materia de subvenciones económicas se estudian la cuantía de la subvención por contratación, el concepto de persona con discapacidad beneficiaria o la compatibilidad entre las subvenciones estatales y autonómicas. En fin, también se aborda la subvención por adaptación de puesto de trabajo.

Is Belgium 'Making Work Pay'?

In the period 2001-2004 two major reforms followed in Belgium: a personal income tax reform (2001) and a reform of social security contributions for low skilled employees (2004). Using a discrete hours labor supply model, this paper assesses the impact of these reforms on aggregate labor supply of males and females in couples. Results suggest that the reforms had a positive (but moderate) effect on both participation and hours worked. Targeted reductions in social security contributions, however, proved to be more effective than the newly introduced tax credit on low earnings.

Green tax reforms in Spain

AbstractIn recent years, the so‐called green tax reforms have become a relevant instrument in the environmental policies of the developed world. These reforms are based on the theory of the double dividend of environmental taxation, which essentially argues in favour of the introduction of such taxes in a revenue‐neutral fashion to reduce other distortionary levies. Given the theoretical ambiguity that exists as to the sign and magnitude of the effects of such reforms, this paper proposes a new methodology which enables us to carry out a comprehensive analysis of the environmental, efficiency and distributional consequences. In order to do so, we have integrated a microeconometric model of household energy demand and an applied general equilibrium model. The simulation of a hypothetical reform in Spain shows that a tax on CO2 emissions, with a simultaneous reduction in social security contributions, provides a net and double improvement (both environmental and fiscal benefits). Furthermore, the distributional effects are virtually insignificant and relatively specific. This paper is especially useful to guide future Spanish climate control policies, as current emissions are far beyond the commitments agreed to by the Spanish government. Copyright © 2004 John Wiley & Sons, Ltd and ERP Environment.

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

In this paper we provide an empirical evaluation of the effects of a cut in social security contributions (i) for all types of labour, and (ii) only for unskilled labour, within a computable general equilibrium model simulated for the Spanish economy. The model allows firms to follow a non-competitive 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 that the public sector deficit is not affected. In addition, the labour market is assumed to follow a matching unemployment rule, which allows to model in a simple way any frictions present in that market.

A Reduction in Social Security Contributions: Which Alternatives for Financing Coverage?

This paper uses the INTIMO model of the Italian economy to analyze the economic impacts of a reduction in social security contributions. This manoeuvre is intended to reduce the tax wedge on labour cost. There is a wide choice of ways to neutralize the revenue effects of a lower tax yield, because several of the existing taxes could be increased and new ones could be introduced. In this study, alternative financing coverages are developed and applied in the model. The results of the study show that substituting different taxes for social security contributions affects the cost of production, and impacts vary with industries. A reduction in contributions compensated for by an increase in value-added tax produces the best results in terms of short-term economic indicators, but the improvement in environmental conditions—not analyzed in this study—achieved by energy taxes could be a very important target and could justify the recourse to this tool.