Whether the payroll tax is assessed on workers or firms makes a difference in the labor market outcomes and changes the equilibrium wages and employment in a competitive labor market.
True/False/Uncertain
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Whether the payroll tax is assessed on workers or firms makes a difference in the labor market outcomes and changes the equilibrium wages and employment in a competitive labor market.
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The skill-biased technical change (SBTC) hypothesis states that if the technological advances that are being introduced constantly into the labor market are good substitutes for unskilled workers and complement the skills of highly educated workers, this type of technological change would lower the demand for unskilled labor and increase the demand for skilled labor.
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Suppose there are two economies, A and B. Economy A suffers from a high degree of skills mismatch between workers and firms, while the mismatch problem is less severe for Economy B. Then the steady-state
unemployment rate is higher in Economy A than in Economy B, because the fraction of employed workers who lose their jobs and become unemployed is higher in Economy A than in Economy B.
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