Productivity, Hours Worked, and Tax/Benefit Systems in Europe and Beyond

Ville Kaitila

No 1015, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: We analyse the development of labour productivity and hours worked by the working-aged population in the EU25 countries and other OECD countries in 1960-2004. We emphasise the possible effects of taxes, benefits and other labour-market variables. First, we describe the trends in productivity and hours worked especially in the EU15 countries relative to the United States. Then we use both cross-section analyses of the 1995-2004 period and pooled least squares panel data analyses of the 1960-2004 period to explain the developments. Taxes and gross replacement rates do not correlate with productivity growth. Instead, productivity growth is influenced positively by investment into fixed assets, R&D and ICT, higher levels of education, and lower product market regulation. According to the results, taxes and gross replacement rates do have a negative effect on the average number of hours worked. Also the ratio between collective bargaining coverage and trade union density as well as higher product market regulation seem to have a negative effect on the number of hours worked.

Keywords: Productivity; growth; hours worked; convergence (search for similar items in EconPapers)
JEL-codes: C33 J24 O47 O57 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2006
New Economics Papers: this item is included in nep-eff
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Citations: View citations in EconPapers (3)

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