A government implements a new, large-scale program to subsidize advanced technical training for the workforce, aiming to boost overall economic productivity. To pay for this program, the government simultaneously introduces a new tax on all business revenues. Which statement best analyzes the combined effect of this policy package on the equilibrium real wage and employment level?
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Rationale for Net Positive Outcomes from Tax-Financed Training
A government implements a new, large-scale program to subsidize advanced technical training for the workforce, aiming to boost overall economic productivity. To pay for this program, the government simultaneously introduces a new tax on all business revenues. Which statement best analyzes the combined effect of this policy package on the equilibrium real wage and employment level?
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Opposing Economic Forces in Policy Implementation
A government policy that funds new public infrastructure projects (which increase worker productivity) by raising corporate taxes will unambiguously lead to higher real wages because the productivity gains will always outweigh the negative impact of the tax on firms' costs.