摘要：We evaluate the effects of permanently reducing labor tax
rates in the euro area (EA) by simulating a large-scale openeconomy
dynamic general equilibrium model. The model features
the EA as a monetary union, split into two regions
(home and the rest of the EA, or REA), the United States,
and the rest of the world, region-specific labor markets with
search and matching frictions, and public employment. Our
results are as follows. First, a permanent reduction in labor
tax rates in the home region would have stimulating effects on
domestic economic activity and employment. Second, reducing
labor tax rates simultaneously in both home and REA would have additional expansionary effects on the home region.
Third, the short-run macroeconomic effectiveness of the EAwide
tax reduction is enhanced if the EA monetary policy is
accommodating.
