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Labour Taxes and Unemployment Evidence from a Panel Unobserved Component Model

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  • T. BERGER

    ()

  • G. EVERAERT

    ()

Abstract

This paper estimates the impact of labour taxes on unemployment using a panel of yearly observations (1970-2001) for 16 OECD countries. Possible heterogeneity of the unemployment incidence of taxes is taken into account by grouping countries according to their wage-setting institutions. Panel data unit root and cointegration tests show that unemployment and labour tax rates are non-stationary but not cointegrated. As this finding may be induced by missing non-stationary variables we set up a panel unobserved component model. Labour taxes are found to have a positive impact on unemployment only in countries characterised by strong but decentralised unions.

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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 07/478.

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Length: 23 pages
Date of creation: Aug 2007
Date of revision:
Handle: RePEc:rug:rugwps:07/478

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Cited by:
  1. Eliana González & Luis F. Melo & Luis E. Rojas & Brayan Rojas, 2010. "Estimations of the natural rate of interest in Colombia," BORRADORES DE ECONOMIA 007667, BANCO DE LA REPÚBLICA.
  2. T. Berger & F. Heylen, 2009. "Differences in hours worked in the OECD: institutions or fiscal policies?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 09/601, Ghent University, Faculty of Economics and Business Administration.
  3. Gert Peersman & Ine Van Robays, 2009. "Oil and the Euro area economy," Economic Policy, CEPR & CES & MSH, vol. 24, pages 603-651, October.
  4. James Morley & Irina B. Panovska & Tara M. Sinclair, 2013. "Testing Stationarity for Unobserved Components Models," Discussion Papers 2012-41A, School of Economics, The University of New South Wales.

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