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Labour Taxes and Unemployment Evidence from a Panel Unobserved Component Model

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  • T. BERGER

    ()

  • G. EVERAERT

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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.

Suggested Citation

  • T. Berger & G. Everaert, 2007. "Labour Taxes and Unemployment Evidence from a Panel Unobserved Component Model," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/478, Ghent University, Faculty of Economics and Business Administration.
  • Handle: RePEc:rug:rugwps:07/478
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    2. 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).
    3. Michael Feil, 2012. "Taxation and unemployment: (systematic) evidence from panel data analysis," EcoMod2012 4472, EcoMod.
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    5. 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.
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    8. 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.
    9. Gert Peersman & Ine Van Robays, 2009. "Oil and the Euro area economy," Economic Policy, CEPR;CES;MSH, vol. 24, pages 603-651, October.
    10. 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).
    11. repec:prg:jnlefa:v:2018:y:2018:i:2:id:209:p:45-58 is not listed on IDEAS
    12. 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.
    13. 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.
    14. 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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