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
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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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