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Tax Wedges, Unemployment Benefits and Labour Market Outcomes in the New EU Members

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Abstract

There has been a widely accepted belief that certain labor market institutions, including high taxation and generous benefits, can lead to low employment and/or high unemployment. To what extent do such priors about tax wedges and unemployment benefits apply to the new members of the EU? Principal Component Analysis (PCA) suggests the new members share similar characteristics to each other and should be grouped separately from the rest of Europe. There are statistically significant differences in the medians of unemployment benefits and the labor market outcomes of the less productive workers, but insignificant differences in primeage outcomes and tax wedges. Within the new members, our non-parametric analysis finds tax wedges and the duration of benefits (not the replacement ratio) are associated with poor labor market outcomes, but the evidence is weak.

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Bibliographic Info

Article provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its journal AUCO Czech Economic Review.

Volume (Year): 3 (2009)
Issue (Month): 1 (March)
Pages: 069-092

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Handle: RePEc:fau:aucocz:au2009_069

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Keywords: Labour market institutions; principal component analysis;

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References

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  1. Andrea Bassanini & Romain Duval, 2006. "Employment Patterns in OECD Countries: Reassessing the Role of Policies and Institutions," OECD Social, Employment and Migration Working Papers 35, OECD Publishing.
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  6. Gayle Allard & Peter H. Lindert, 2006. "Euro-Productivity and Euro-Jobs since the 1960s: Which Institutions Really Mattered?," NBER Working Papers 12460, National Bureau of Economic Research, Inc.
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Cited by:
  1. Ana Grdoviæ Gnip & Iva Tomic, 2010. "How hard does the tax bite hurt? Croatian vs. European worker," Financial Theory and Practice, Institute of Public Finance, Institute of Public Finance, vol. 34(2), pages 109-142.
  2. D. Filiz Unsal & Carlos Caceres, 2011. "Sovereign Spreads and Contagion Risks in Asia," IMF Working Papers 11/134, International Monetary Fund.
  3. Daniel Němec, 2013. "Investigating Differences Between the Czech and Slovak Labour Market Using a Small DSGE Model with Search and Matching Frictions," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 7(1), pages 021-041, March.
  4. Anna Kochanova & Carlos Caceres, 2012. "Country Stress Events," IMF Working Papers 12/116, International Monetary Fund.
  5. Primoz Dolenc & Suzana Laporsek, 2012. "Labour Taxation and Its Impact on Employment Growth," Managing Global Transitions, University of Primorska, Faculty of Management Koper, vol. 10(3 (Fall)), pages 301-318.
  6. Anna Zasova, 2011. "Labour market institutions: an obstacle or support to Latvian labour market recovery?," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 11(1), pages 5-24, July.
  7. Leoš Vítek, 2011. "Fiscal Instruments of a Support of the Families with Children and their Changes in Developed Countries," European Financial and Accounting Journal, University of Economics, Prague, vol. 2011(4), pages 60-84.
  8. H. Lehmann & A. Muravyev, 2010. "Labor market institutions and labor market performance: what can we learn from transition countries?," Working Papers 714, Dipartimento Scienze Economiche, Universita' di Bologna.
  9. Bashevska, Marija, 2014. "Политиките На Пазарот На Труд И Сиромаштијата Во Македонија, 2008 - 2013
    [Labour market, employment policies and poverty in R. Macedonia, 2008 - 2013]
    ," MPRA Paper 57768, University Library of Munich, Germany.
  10. Primož Dolenc & Suzana Laporšek, 2010. "Tax Wedge on Labour and its Effect on Employment Growth in the European Union," Prague Economic Papers, University of Economics, Prague, vol. 2010(4), pages 344-358.
  11. Alexei Izyumov, 2010. "Human Costs of Post-communist Transition: Public Policies and Private Response," Review of Social Economy, Taylor & Francis Journals, vol. 68(1), pages 93-125.
  12. Hazans, Mihails, 2011. "What explains prevalence of informal employment in European countries : the role of labor institutions, governance, immigrants, and growth," Policy Research Working Paper Series 5917, The World Bank.

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