Labour Taxes and Unemployment Evidence from a Panel Unobserved Component Model

Tino Berger and Gerdie Everaert

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This paper estimates the impact of labour taxes on unemployment using a panel of yearly observations (1970-2001) for 16 OECD countries. Possible heterogeneity of the unemployment incidence of taxes is taken into account by grouping countries according to their wage-setting institutions. Panel data unit root and cointegration tests show that unemployment and labour tax rates are non-stationary but not cointegrated. As this finding may be induced by missing non-stationary variables we set up a panel unobserved component model. Labour taxes are found to have a positive impact on unemployment only in countries characterised by strong but decentralised unions.

Pages: 23 pages
Date: 2007-08
New Economics Papers: this item is included in nep-lab
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Citations: View citations in EconPapers (10)

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Journal Article: Labour taxes and unemployment evidence from a panel unobserved component model (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:07/478

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