Pareto-Improving Unemployment Policies
CESifo, Munich, 2006
CESifo Working Paper No. 1807
![](https://cesifo.org/DocImg/cesifo1_wp1807.jpg?c=1689236955)
We investigate how continental European unemployment can be reduced without reducing unemployment benefits and without reducing the net income of low-wage earners. Lower unemployment replacement rates reduce unemployment, the net wage and unemployment benefits. A lower tax on labour increases net wages and - for certain benefit-systems - unemployment benefits as well. Combining these two policies allows to reduce unemployment in countries with “net-Bismarck” and Beveridge systems without reducing net income of workers or of the unemployed. Such a policy becomes self-financing under realistic parameter constellations when taxes are reduced only for low-income workers.
Labour Markets