Employment Policy of Government: To Create Jobs or to Let Them Create

摘要

The report provides an analysis of the effect of corporate tax rate policy as an instrument to achievement more employment. A low level of corporate tax rate gives the firm more opportunities to invest and to create jobs, but on the other hand a high level of corporate tax rate increases the number of people working in the public sector. So there is a certain trade-off between employment in the private sector and in the public sector. A differential game framework is applied to analyze the trade-off and pay attention to different solution concepts (open-loop and feedback). After comparing the results, it was concluded that credibility and reputation play an important role in the effectivity of governmental employment policy.