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How to Measure the Tax Burden on Labour at the Macro-Level?

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  • Jan-Egbert Sturm
  • Bjørn Volkerink

Abstract

The purpose of this paper is threefold. First, we survey the way in which the tax burden on labour has been proxied for in recent multi-country macro-economic studies. Second, we critically evaluate these proxies. Finally, we examine to what extent the conclusions of some studies change if some alternative indicator for the tax burden on labour is employed. We conclude that the widely used tax ratios as developed by Mendoza et al. (1994) may not be very reliable. The choice of the indicator for the tax burden on labour is also shown to affect the conclusions of some well-known empirical models.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 963.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_963

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Keywords: tax ratios; labour; average effective tax rates; unemployment;

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References

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  1. Willem Adema & Marcel Einerhand & Bengt Eklind & Jorgen Lotz & Mark Pearson, 1996. "Net Public Social Expenditure," OECD Labour Market and Social Policy Occasional Papers, OECD Publishing 19, OECD Publishing.
  2. Asea, Patrick & Mendoza, Enrique G & Milesi-Ferretti, Gian Maria, 1996. "On the Ineffectiveness of Tax Policy in Altering Long- Run Growth: Harberger's Superneutrality Conjecture," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1378, C.E.P.R. Discussion Papers.
  3. Perotti, Roberto & Alesina, Alberto, 1997. "The Welfare State and Competitiveness," Scholarly Articles 4553027, Harvard University Department of Economics.
  4. Belot, M.V.K. & Ours, J.C. van, 2001. "Unemployment and labor market institutions: An empirical analysis," Open Access publications from Tilburg University urn:nbn:nl:ui:12-89213, Tilburg University.
  5. Alberto Alesina & Roberto Perotti, 1994. "The Welfare State and Competitiveness," NBER Working Papers 4810, National Bureau of Economic Research, Inc.
  6. Luca Nunziata, 2001. "Institutions and Wage Determination: a Multi-Country Approach," Economics Series Working Papers 2001-W29, University of Oxford, Department of Economics.
  7. Francesco Daveri & Guido Tabellini, . "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  8. Blanchard, Olivier & Wolfers, Justin, 2000. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(462), pages C1-33, March.
  9. Lucas, Robert E, Jr, 1990. "Supply-Side Economics: An Analytical Review," Oxford Economic Papers, Oxford University Press, vol. 42(2), pages 293-316, April.
  10. Islam, Nazrul, 1995. "Growth Empirics: A Panel Data Approach," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 110(4), pages 1127-70, November.
  11. 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, London School of Economics and Political Science, vol. 53(210(S)), pages S1-22, Supplemen.
  12. Thomas I. Palley, . "The Role of Institutions and Policies in Creating High European Unemployment: The Evidence," Economics Working Paper Archive wp_336, Levy Economics Institute.
  13. Christopher Heady, 2003. "The "Taxing Wages" Approach to Measuring the Tax Burden on Labour," CESifo Working Paper Series 967, CESifo Group Munich.
  14. Richard Layard & Stephen Nickell, 1998. "Labour Market Institutions and Economic Performance," CEP Discussion Papers dp0407, Centre for Economic Performance, LSE.
  15. repec:fth:bfdipa:19/2001 is not listed on IDEAS
  16. Mendoza, Enrique G. & Razin, Assaf & Tesar, Linda L., 1994. "Effective tax rates in macroeconomics: Cross-country estimates of tax rates on factor incomes and consumption," Journal of Monetary Economics, Elsevier, Elsevier, vol. 34(3), pages 297-323, December.
  17. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 11(3), pages 55-74, Summer.
  18. Koskela , Erkki, 2001. "Labour taxation and employment in trade union models: A partial survey," Research Discussion Papers, Bank of Finland 19/2001, Bank of Finland.
  19. Fiorito, Riccardo & Padrini, Flavio, 2001. " Distortionary Taxation and Labour Market Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 173-96, May.
  20. Francesco Daveri, 2002. "Labor Taxes and Unemployment: a Survey of the Aggregate Evidence," CeRP Working Papers 18, Center for Research on Pensions and Welfare Policies, Turin (Italy).
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Citations

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Cited by:
  1. Eichhorst, Werner & Feil, Michael & Braun, Christoph, 2008. "What have we learned? Assessing labor market institutions and indicators," IAB Discussion Paper 200822, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  2. Axel Dreher, 2003. "The Influence of Globalization on Taxes and Social Policy – an Empirical Analysis for OECD Countries," Public Economics, EconWPA 0310002, EconWPA, revised 27 Feb 2004.
  3. Evridiki Tsounta, 2006. "Why Are Women Working so Much More in Canada? An International Perspective," IMF Working Papers 06/92, International Monetary Fund.
  4. 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.
  5. Peter Schwarz, 2007. "Does capital mobility reduce the corporate-labor tax ratio?," Public Choice, Springer, Springer, vol. 130(3), pages 363-380, March.
  6. Marek Gora & Artur Radziwill & Agnieszka Sowa & Mateusz Walewski, 2006. "Tax Wedge and Skills: Case of Poland in International Perspective," CASE Network Reports 0064, CASE-Center for Social and Economic Research.

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