Kiel Working Papers, Kiel Institute for World Economics
No 985:
Unemployment and Labour Market Rigidities in OECD Countries ; The Impact of Taxes
Bernhard Heitger
Abstract: This paper investigates unemployment and labour market
rigidities in OECD countries in 19831994. The central issue is the
taxation-unemployment relationship and whether this relationship is
exogenous or simultaneously determined. Hausman specification tests
indicate that the impact of taxation on short-term unemployment is positive
and exogenous whereas the relationship between taxation and long-term
unemployment is simultaneously determined. Correcting for this simultaneity
results in a much higher, significant and positive regression coefficient
for the impact of taxation. Thus, high taxation seems to be one of the main
determinants of long-term unemployment.
Keywords: Unemployment, labour market institutions, taxation; (follow links to similar papers)
JEL-Codes: E24; (follow links to similar papers)
25 pages, May 2000
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