Unemployment and labour market rigidities in OECD countries: the impact of taxes

Bernhard Heitger

No 985, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper investigates unemployment and labour market rigidities in OECD countries in 1983?1994. The central issue is the taxation-unemployment relationship and whether this relationship is exogenous or simultaneously determined. Hausman specification tests indicate that the impact of taxation on short-term unemployment is positive and exogenous whereas the relationship between taxation and long-term unemployment is simultaneously determined. Correcting for this simultaneity results in a much higher, significant and positive regression coefficient for the impact of taxation. Thus, high taxation seems to be one of the main determinants of long-term unemployment.

Keywords: Unemployment; labour market institutions; taxation (search for similar items in EconPapers)
JEL-codes: E24 (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:985

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