Arbeitspapier

Beyond the Labour Income Tax Wedge: The Unemployment-Reducing Effect of Tax Progressivity

This paper argues that, for a given overall level of labour income taxation, a more progressive tax schedule reduces the unemployment rate and increases the employment rate. From a theoretical point of view, higher progressivity induces a wage-moderation effect and increases overall employment since employment of low-paid workers is more responsive. We test these theoretical predictions on a panel of 21 OECD countries over 1998-2008. Controlling for the burden of taxation at the average wage, we show that a more progressive taxation reduces the unemployment rate and increases the employment rate. These findings are confirmed when we account for the potential endogeneity of both average taxation and progressivity. Overall our results suggest that policy-makers should not only focus on the detrimental effects of tax progressivity on in-work effort.

Sprache
Englisch

Erschienen in
Series: CESifo Working Paper ; No. 4348

Klassifikation
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Taxation and Subsidies: Incidence
Mobility, Unemployment, and Vacancies: Public Policy
Thema
wage moderation
employment
taxation

Ereignis
Geistige Schöpfung
(wer)
Lehmann, Etienne
Lucifora, Claudio
Moriconi, Simone
Van der Linden, Bruno
Ereignis
Veröffentlichung
(wer)
Center for Economic Studies and ifo Institute (CESifo)
(wo)
Munich
(wann)
2013

Handle
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Lehmann, Etienne
  • Lucifora, Claudio
  • Moriconi, Simone
  • Van der Linden, Bruno
  • Center for Economic Studies and ifo Institute (CESifo)

Entstanden

  • 2013

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