What Are the Economic and Labour Market Effects of an Income Tax Reduction Targeted at Older Workers?
Table 7
Impact of a 10% permanent and temporary reduction in earned income taxes for workers aged 60 and over with a lower intratemporal elasticity of substitution key macroeconomic indicators*.
Macroeconomic indicators
Permanent
Temporary
2010
2030
2050
2010
2030
2050
Real GDP per capita
0.05 (−0.03)
0.05 (0.00)
0.05 (−0.05)
0.08 (0.00)
0.17 (−0.03)
0.08 (0.01)
Labour supply/capita
0.10 (−0.03)
0.17 (−0.01)
0.25 (−0.05)
0.13 (0.01)
0.22 (−0.02)
0.06 (0.01)
National savings
−0.27 (0.02)
−0.15 (−0.01)
−0.24 (0.01)
−0.20 (0.01)
0.36 (0.15)
0.18 (0.03)
Capital stock/capita
−0.06 (−0.01)
−0.30 (0.02)
−0.55 (−0.08)
−0.03 (0.00)
0.00 (−0.08)
0.14 (−0.02)
Capital/labour ratio
−0.16 (0.03)
−0.54 (0.03)
−0.95 (−0.02)
−0.17 (−0.01)
−0.29 (−0.08)
0.08 (−0.03)
Real wages
−0.05 (0.00)
−0.14 (0.01)
−0.24 (0.00)
−0.05 (0.00)
−0.08 (−0.02)
0.02 (−0.01)
Earned income tax rate
−0.14 (−0.01)
−0.14 (−0.01)
−0.13 (0.00)
−0.15 (−0.02)
−0.16 (−0.01)
−0.01 (0.00)
*Percentage point difference against the reference scenario. Values in brackets are differences compared with the first scenario. See Tables 3 and 5. The substitution elasticity between consumption and leisure in the general equilibrium model is reduced from 0.8 to 0.6.
