A chapter on long-term unemployment in Poland, in a Vox eBook on long-term unemployment after the Great Recession edited by Samuel Bentolila and Marcel Jansen. Open access pdf available.
We apply a multi-sector dynamic stochastic general equilibrium (DSGE) model to study two types of taxation: tax on material inputs used by industry, energy, construction, and transport sectors, and tax on output of these sectors. We allow for the endogenous adoption of resource-saving technologies. We calibrate the model for the EU27 area using an IO matrix. Input and output taxation create contrasting incentives and have opposite effects on resource efficiency. The material input tax induces investment in efficiency-improving technology which, in the long term, results in GDP and employment by 15%–20% higher than a comparable output tax. We also find that using revenues to reduce taxes on labour has stronger beneficial effects for the input tax.
We study the impact of real wage, productivity, labour demand and supply shocks on eight Central and Eastern European (CEE) economies from 1996–2007 with a panel structural vector error correction model. A set of long-run restrictions derived from the dynamic stochastic general equilibrium (DSGE) model is used to identify structural shocks, and fluctuations in foreign demand are controlled for. Labour demand shocks emerge as the main determinant of employment and unemployment variability in the short-to-medium run, but wage rigidities were equally important for observed labour market performance, especially in Poland, Czech Republic and Lithuania. We associate these rigidities with collective bargaining, minimum wage, active labour market policies, and employment protection legislation.
