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Does Labour Taxation Affect Unemployment? Croatian Worker in International Perspective

Author

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  • Primož Dolenc
  • Suzana Laporšek
  • Anamarija Šeparović

Abstract

The paper examines the issue of labour taxation of Croatian worker in comparison to workers in OECD and EU Member States. By using hierarchical cluster analysis it studies the relations between tax wedge and labour market outcomes, whereas with panel regression analysis, performed on data for 39 countries during 2000–2008 period, estimates the impact of tax wedge on unemployment rate. The empirical estimates show that Croatia classifies among countries with higher unemployment and lower employment rate, characterized with higher tax wedge. Furthermore, the estimates of the regression analysis showed that the tax wedge at all three wage levels (i.e. 67 %, 100 % and 167 % of average wage) has a significant positive impact on unemployment rate. This signifies that Croatia, as other studied countries, should continue with reduction of tax wedge, as this would alleviate unemployment problems and stimulate job creation.

Suggested Citation

  • Primož Dolenc & Suzana Laporšek & Anamarija Šeparović, 2011. "Does Labour Taxation Affect Unemployment? Croatian Worker in International Perspective," Economic Research-Ekonomska Istraživanja, Taylor & Francis Journals, vol. 24(3), pages 86-101, January.
    • Handle: RePEc:taf:reroxx:v:24:y:2011:i:3:p:86-101
    DOI: 10.1080/1331677X.2011.11517469
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