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Productivity, Hours Worked, and Tax/Benefit Systems in Europe and Beyond

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  • Kaitila, Ville

Abstract

We analyse the development of labour productivity and hours worked by the working-aged population in the EU25 countries and other OECD countries in 1960-2004. We emphasise the possible effects of taxes, benefits and other labour-market variables. First, we describe the trends in productivity and hours worked especially in the EU15 countries relative to the United States. Then we use both cross-section analyses of the 1995-2004 period and pooled least squares panel data analyses of the 1960-2004 period to explain the developments. Taxes and gross replacement rates do not correlate with productivity growth. Instead, productivity growth is influenced positively by investment into fixed assets, R&D and ICT, higher levels of education, and lower product market regulation. According to the results, taxes and gross replacement rates do have a negative effect on the average number of hours worked. Also the ratio between collective bargaining coverage and trade union density as well as higher product market regulation seem to have a negative effect on the number of hours worked.

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Bibliographic Info

Paper provided by The Research Institute of the Finnish Economy in its series Discussion Papers with number 1015.

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Length: 34 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:rif:dpaper:1015

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Keywords: Productivity; growth; hours worked; convergence;

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Cited by:
  1. Alho, Kari & Nikula, Nuutti, 2007. "Productivity, Employment and Taxes - A SVAR Analysis of Trade-offs and Impacts," Discussion Papers 1074, The Research Institute of the Finnish Economy.
  2. Alho, Kari E. O., 2008. "Tax/benefit Systems and Growth Potential of the EU," Discussion Papers 1122, The Research Institute of the Finnish Economy.
  3. Alho, Kari O.E. & Nikula, Nuutti, 2006. "Productivity, Empoyment and Taxes - Evidence on the Potential Trade-offs and Impacts in the EU," Discussion Papers 1054, The Research Institute of the Finnish Economy.

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