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Can Tax Wedge Affect Labor Productivity?. A Tsls Fixed Model On Oecd Panel Data


  • DING, Hong



This paper studies the econometric relationship between labor productivity and tax wedge by using two-stage least square (TSLS) fixed effect model on two panel data of OECD countries to address endogeneity problem. I use two response variables, i.e., the growth rate of GDP per hour worked and the log of value added per hour worked for total manufacturing industry in 1997 dollar from two data sources, to verify whether the estimates of the effect of tax wedge are consistent each other. I do find that they are consistent and one percentage increase in tax wedge can lead to about 0.09 percentage decrease in labor productivity growth rate.

Suggested Citation

  • DING, Hong, 2008. "Can Tax Wedge Affect Labor Productivity?. A Tsls Fixed Model On Oecd Panel Data," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 5(1), pages 15-32.
  • Handle: RePEc:eaa:ijaeqs:v:5:y2008:i:1_2

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    Cited by:

    1. Andrea FESTA, 2015. "Employment and productivity: The role of the tax wedge," EuroEconomica, Danubius University of Galati, issue 2(34), pages 139-150, November.

    More about this item


    tax wedge; labor productivity; instrument variable estimation; fixed effect model; welfare state;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • P51 - Economic Systems - - Comparative Economic Systems - - - Comparative Analysis of Economic Systems


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