This paper argues that, contrary to the views of most development economists, policies that raise the cost of labor relative to capital are in the collective and individual interest of LDCs. The reason is that low wages mean that the attractiveness of an LDC production location is positively correlated with labor intensity. A labor tax combined with a capital subsidy consequently hits hardest the processes willing to pay the most to produce in an LDC. Even if employment is a concern, the policy is still beneficial if elasticities of substitution are in the empirically relevant range

De Meza, D., Natale, P. (1989). Efficient Job Creation in LDCs Requires a Tax on Employment. ECONOMIC JOURNAL, 99(398), 1112-1122 [10.2307/2234091].

Efficient Job Creation in LDCs Requires a Tax on Employment

NATALE, PIERGIOVANNA
1989

Abstract

This paper argues that, contrary to the views of most development economists, policies that raise the cost of labor relative to capital are in the collective and individual interest of LDCs. The reason is that low wages mean that the attractiveness of an LDC production location is positively correlated with labor intensity. A labor tax combined with a capital subsidy consequently hits hardest the processes willing to pay the most to produce in an LDC. Even if employment is a concern, the policy is still beneficial if elasticities of substitution are in the empirically relevant range
Articolo in rivista - Articolo scientifico
Tax in LDCs, employment in LDCs
English
dic-1989
99
398
1112
1122
none
De Meza, D., Natale, P. (1989). Efficient Job Creation in LDCs Requires a Tax on Employment. ECONOMIC JOURNAL, 99(398), 1112-1122 [10.2307/2234091].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/15977
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