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Labour taxes and unemployment evidence from a panel unobserved component model

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  • Berger, Tino
  • Everaert, Gerdie

Abstract

This paper estimates the impact of labour taxes on unemployment using a panel of yearly observations (1970-2005) 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.

Suggested Citation

  • Berger, Tino & Everaert, Gerdie, 2010. "Labour taxes and unemployment evidence from a panel unobserved component model," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 354-364, March.
  • Handle: RePEc:eee:dyncon:v:34:y:2010:i:3:p:354-364
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    Cited by:

    1. Chen, Xiaoshan & MacDonald, Ronald, 2014. "Measuring the Euro-Dollar Permanent Equilibrium Exchange Rate using the Unobserved Components Model," SIRE Discussion Papers 2015-05, Scottish Institute for Research in Economics (SIRE).
    2. Gert Peersman & Ine Van Robays, 2009. "Oil and the Euro area economy," Economic Policy, CEPR;CES;MSH, vol. 24, pages 603-651, October.
    3. Michael Feil, 2012. "Taxation and unemployment: (systematic) evidence from panel data analysis," EcoMod2012 4472, EcoMod.
    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.
    5. Eliana González & Luis F. Melo & Luis E. Rojas & Brayan Rojas, 2011. "Estimations of the Natural Rate of Interest in Colombia," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 33-75, January-J.
    6. Tino Berger & Freddy Heylen, 2011. "Differences in Hours Worked in the OECD: Institutions or Fiscal Policies?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(7), pages 1333-1369, October.
    7. Sharon Miller-Betty, 2011. "Monetary Policy “Alternatives” in the Face of a Dysfunctional Transmission Mechanism," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 97-121, January-J.
    8. Troy Lorde & Jason Lacorbiniere & Brian Francis, 2011. "Offshore Barbados: a Critical Analysis," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 1-31, January-J.
    9. Everaert Gerdie, 2011. "Estimation and Inference in Time Series with Omitted I(1) Variables," Journal of Time Series Econometrics, De Gruyter, vol. 2(2), pages 1-28, January.
    10. Philip Liu & Rafael Romeu, 2011. "A Dynamic Factor Model of Quarterly Real Gross Domestic Product Growth in the Caribbean: The Case of Cuba and the Bahamas," Money Affairs, Centro de Estudios Monetarios Latinoamericanos, vol. 0(1), pages 77-95, January-J.
    11. Chen, Xiaoshan & MacDonald, Ronald, 2014. "Measuring the Euro-Dollar Permanent Equilibrium Exchange Rate using the Unobserved Components Model," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon TN 2015-05, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    12. Chen, Xiaoshan & MacDonald, Ronald, 2015. "Measuring the dollar–euro permanent equilibrium exchange rate using the unobserved components model," Journal of International Money and Finance, Elsevier, vol. 53(C), pages 20-35.

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