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Tax policy and OECD unemployment

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  • Alvin Ó Murchú

Abstract

The effect of changes in payroll taxes on wages is a question of tax incidence. If workers can shift the burden of taxation onto employers, in the form of higher wages, we may expect increases in unemployment. This paper examines the extent to which workers succeed in shifting the burden of taxation onto employers and therefore the effects on unemployment of higher direct taxes. A reduced form vector autoregression model is used to estimate the effects, of a shock to direct taxes, on both wages and unemployment. The empirical estimates, estimated separately for eleven OECD countries, show workers failing to shift the burden of higher taxes and consequently insignificant changes in unemployment.

Suggested Citation

  • Alvin Ó Murchú, 2002. "Tax policy and OECD unemployment," Working Papers 200231, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200231
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    File URL: http://hdl.handle.net/10197/1276
    File Function: First version, 2002
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    References listed on IDEAS

    as
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    1. Ideology in action
      by chris dillow in Stumbling and Mumbling on 2010-04-04 14:46:31

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