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Employment and Taxes

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  • Stephen Nickell

Abstract

This paper considers the impact of taxation policy on market work. On the basis of the evidence, we find that a 10 percentage point rise in the tax wedge will reduce overall labour input provided via the market by around 2 per cent of the population of working age. The tax wedge is the sum of the payroll, income and consumption tax rates. This only explains a minority of the market work differentials across countries. Much of the remainder is probably down to the differences in the social security systems supporting the unemployed, the sick and disabled and the early retired.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1109.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_1109

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Keywords: employment; taxation; labour supply;

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  1. Bean, C R & Layard, P R G & Nickell, S J, 1986. "The Rise in Unemployment: A Multi-country Study," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S1-22, Supplemen.
  2. Dolado, J J & Malo de Molina, J L & Zabalza, A, 1986. "Spanish Industrial Unemployment: Some Explanatory Factors," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S313-34, Supplemen.
  3. Christophe Planas & Werner Roeger & Alessandro Rossi, 2003. "How much has labour taxation contributed to European structural unemployment?," European Economy - Economic Papers 183, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  4. Bound, John & Burkhauser, Richard V., 1999. "Economic analysis of transfer programs targeted on people with disabilities," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 51, pages 3417-3528 Elsevier.
  5. Sveinbjörn Blöndal & Stefano Scarpetta, 1999. "The Retirement Decision in OECD Countries," OECD Economics Department Working Papers 202, OECD Publishing.
  6. Ronald Schettkat & Richard B. Freeman, 2002. "Marketization of production and the US-Europe employment gap," LSE Research Online Documents on Economics 20061, London School of Economics and Political Science, LSE Library.
  7. Holmlund, B. & Kolm, A.S., 1995. "Progressive Taxation, Wage Setting, and Unemployment , Theory and Swedish Evidence," Papers 1995-15, Uppsala - Working Paper Series.
  8. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 47-104, 04.
  9. Bertola, Giuseppe & Blau, Francine D & Kahn, Lawrence, 2002. "Labour Market Institutions and Demographic Employment Patterns," CEPR Discussion Papers 3448, C.E.P.R. Discussion Papers.
  10. Alesina, Alberto & Perotti, Roberto, 1997. "The Welfare State and Competitiveness," American Economic Review, American Economic Association, vol. 87(5), pages 921-39, December.
  11. Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
  12. Knoester, Anthonie & van der Windt, Nico, 1987. "Real Wages and Taxation in Ten OECD Countries," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 49(1), pages 151-69, February.
  13. Willi Leibfritz & John Thornton & Alexandra Bibbee, 1997. "Taxation and Economic Performance," OECD Economics Department Working Papers 176, OECD Publishing.
  14. Fiorella Padoa-Schioppa, 1992. "A Cross-Country Analysis of the Tax-Push Hypothesis," IMF Working Papers 92/11, International Monetary Fund.
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