Taxes and Unemployment

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The chapter details various models used to analyze the impact of tax rate changes on the labor market, highlighting fundamental mechanisms and key assumptions. It notes that while the models assume identical workers and firms initially, they allow for differences post-analysis, particularly concerning unemployment and firm closures. The study identifies gaps for future research, such as the effects of heterogeneity among workers and firms, the absence of product market interactions, and neglecting capital accumulation and international competition.