The research project analyzes the role of tax and pension systems on the evolution of capital formation and
unemployment.
On the one hand, the recent macroeconomic literature stresses the importance of the long-run relationship between
growth and unemployment, but deals only little with the impact of taxation and social security. On the other hand,
the public finance literature deals to a large extent with static models abstracting from long-run effects of capital
accumulation.
In this research project, a dynamic general equilibrium model will be developed whose labor market is
characterized by wage bargaining and involuntary unemployment, and in which the effects of tax and pension
reforms on growth and unemployment can be explored.
In this framework the impact of the tax system on the adaptability of the economy to various types of
macroeconomic shocks will be analyzed, and it will be studied whether a tax reform shifting the tax burden partly
from labor to capital can be beneficial, even in the face of integrated international capital markets.
Furthermore, it is analyzed how a pay-as-you-go pension system affects the evolution of employment when the
old-age dependency ratio increases, and whether a partly transition to a capital-based pension system can be
beneficial due to positive employment effects. The role of government debt and of international capital mobility are
taken into account explicitly.