Labour taxes and unemployment evidence from a panel unobserved component model

Tino Berger and Gerdie Everaert

Journal of Economic Dynamics and Control, 2010, vol. 34, issue 3, 354-364

Abstract: This paper estimates the impact of labour taxes on unemployment using a panel of yearly observations (1970-2005) 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.

Keywords: Labour; taxes; Unemployment; Panel; cointegration; Unobserved; components; Kalman; filter (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (15)

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Working Paper: Labour Taxes and Unemployment Evidence from a Panel Unobserved Component Model (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:34:y:2010:i:3:p:354-364

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