Beyond the labour income tax wedge: the unemployment-reducing effect of tax progressivity
| Autor: | Simone Moriconi, Etienne Lehmann, Claudio Lucifora, Bruno Van der Linden |
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| Rok vydání: | 2015 |
| Předmět: |
Economics and Econometrics
Labour economics Double taxation media_common.quotation_subject 05 social sciences Wage Settore SECS-P/01 - ECONOMIA POLITICA International taxation Unemployment Accounting Income tax Tax Progressivity 0502 economics and business Progressive tax Economics Endogeneity 050207 economics health care economics and organizations Finance 050205 econometrics media_common Public finance |
| Zdroj: | International Tax and Public Finance. 23:454-489 |
| ISSN: | 1573-6970 0927-5940 |
| DOI: | 10.1007/s10797-015-9377-9 |
| Popis: | In this paper, we argue that, for a given overall level of labour income taxation, a more progressive tax schedule increases employment. From a theoretical point of view, higher progressivity increases overall employment through a wage moderating effect and also because employment of low-paid workers is more elastic to wages. 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, our estimates suggest that a more progressive tax schedule 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, but also consider the employment-enhancing effects. |
| Databáze: | OpenAIRE |
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