Title: How Much Has Labour Taxation Contributed to EU Structural Unemployment?
Authors: PLANAS CHRISTOPHEROEGER WernerROSSI ALESSANDRO
Citation: JOURNAL OF ECONOMIC DYNAMICS & CONTROL vol. 31 p. 1359-1375
Publisher: ELSEVIER SCIENCE BV
Publication Year: 2007
JRC Publication N°: JRC33224
ISSN: 0165-1889
URI: http://dx.doi.org/10.1016.j.jedc.2006.05.005
http://publications.jrc.ec.europa.eu/repository/handle/JRC33224
DOI: 10.1016.j.jedc.2006.05.005
Type: Articles in Journals
Abstract: We analyse the effect of labour taxes on euro area unemployment. Making use of the Blanchard and Katz (1999) NAIRU model, we represent structural unemployment as made up of two elements: an observed part related to labour taxes plus a non-stationary unobservable component related to the reservation wage and to the wage mark up. Contrary to empirical estimates available so far, this modelling explicitly acknowledges the existence of non-measurable factors responsible for the unemployment non-stationarity. For the period 1970-2004 we obtain a tax effect that lies in the middle of the estimates that can be found in the literature. This study gives support to the view that lowering labour taxes can help to reduce unemployment in continental Europe.
JRC Institute:Institute for the Protection and Security of the Citizen

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