The effect of labour taxes on labour demand: a comparison between Belgium and neighbouring countries
Wout Laenen,
Cindy Moons () and
Damiaan Persyn
Additional contact information
Cindy Moons: Hogeschool-Universiteit Brussel (HUB), Belgium
No 2011/25, Working Papers from Hogeschool-Universiteit Brussel, Faculteit Economie en Management
Abstract:
This study examines the evolution of labour costs and taxes in Belgium and neighbouring countries. We try to clarify the common issues in the current debate concerning labour costs and labour demand in Belgium and neighbouring countries and investigate the influence of labour costs on employment by using macroeconomic OECD data. We conclude that the tax wedge in Belgium is one of the highest of all OECD countries. Labour costs in Belgium rose at a moderate tempo, but labour productivity evolved less favourably compared with neighbouring countries. Belgian unit labour costs, considered as an indicator of competitiveness, evolved unfavourably. By using a dynamic error correction model we find a statistically significant but limited negative relation between labour costs and employment. A decrease in labour costs of 10% results in an increase of employment of only 1.3%, which indicates a strongly inelastic labour demand. In contrast to studies based on microeconomic data, which find generally higher wage elasticities, on the basis of this study no decisive elements can be found to question the rationale of the current wage indexation mechanism.
Keywords: economic history; ECSC; European Integration; regional concentration (search for similar items in EconPapers)
Pages: 27 page
Date: 2011-09
New Economics Papers: this item is included in nep-eec, nep-his, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations:
Downloads: (external link)
https://lirias.hubrussel.be/bitstream/123456789/5158/1/11HRP25.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to lirias.hubrussel.be:443 (No such host is known. )
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:hub:wpecon:201125
Access Statistics for this paper
More papers in Working Papers from Hogeschool-Universiteit Brussel, Faculteit Economie en Management Contact information at EDIRC.
Bibliographic data for series maintained by Sabine Janssens ( this e-mail address is bad, please contact ).