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Labour Taxation and its Effect on Employment Growth: Latest Estimations with Focus on the Czech Republic

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  • Lucie Kábelová
  • Ondřej Bayer

Abstract

The paper aims to assess effects of the tax wedge on the employment rate in the Czech Republic. To investigate the impact of the tax wedge on the employment growth, we used a one-equation cointegration model based on the Engle-Granger theorem on OECD data. The results are surprising, because of an unexpected positive relationship between endogenous and exogenous variables. The paper itself is divided into five main parts. The first part is an introduction to the topic and a review of the literature, the second part is on data, the third part is on the statistical methodology and the last two parts cover results and the final conclusion.

Suggested Citation

  • Lucie Kábelová & Ondřej Bayer, 2018. "Labour Taxation and its Effect on Employment Growth: Latest Estimations with Focus on the Czech Republic," European Financial and Accounting Journal, Prague University of Economics and Business, vol. 2018(2), pages 45-57.
    • Handle: RePEc:prg:jnlefa:v:2018:y:2018:i:2:id:209:p:45-58
    DOI: 10.18267/j.efaj.209
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    References listed on IDEAS

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    1. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and in the long run?," Public Economics 0411004, University Library of Munich, Germany.
    2. Stephen Nickell, 2003. "Employment and Taxes," CESifo Working Paper Series 1109, CESifo.
    3. Alesina, Alberto & Perotti, Roberto, 1997. "The Welfare State and Competitiveness," American Economic Review, American Economic Association, vol. 87(5), pages 921-939, December.
    4. Stephen Nickell & Luca Nunziata & Wolfgang Ochel, 2005. "Unemployment in the OECD Since the 1960s. What Do We Know?," Economic Journal, Royal Economic Society, vol. 115(500), pages 1-27, January.
    5. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 48-104.
    6. Berger, Tino & Everaert, Gerdie, 2010. "Labour taxes and unemployment evidence from a panel unobserved component model," Journal of Economic Dynamics and Control, Elsevier, vol. 34(3), pages 354-364, March.
    7. María Racionero, 2013. "The Economics of Taxation (Second edition) , by Bernard Salanié ( The MIT Press, Massachusetts Institute of Technology , Cambridge , 2011 ), pp. viii + 237 ," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 276-278, June.
    8. Planas, Christophe & Roeger, Werner & Rossi, Alessandro, 2007. "How much has labour taxation contributed to European structural unemployment?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1359-1375, April.
    9. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and the long run? - Alfonso Arpaia and Giuseppe Carone," European Economy - Economic Papers 2008 - 2015 216, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    10. Richard W. Blundell, 1995. "The Impact of Taxation on Labour Force Participation and Labour Supply," OECD Jobs Study Working Papers 8, OECD Publishing.
    11. Riccardo Fiorito & Flavio Padrini, 2001. "Distortionary Taxation and Labour Market Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 63(2), pages 173-196, May.
    12. Primoz Dolenc & Milan Vodopivec, 2005. "The tax wedge in Slovenia: international comparison and policy recommendations," Financial Theory and Practice, Institute of Public Finance, vol. 29(3), pages 229-243.
    13. Jan-Egbert Sturm & Bjørn Volkerink, 2003. "How to Measure the Tax Burden on Labour at the Macro-Level?," CESifo Working Paper Series 963, CESifo.
    14. repec:bla:obuest:v:63:y:2001:i:2:p:173-96 is not listed on IDEAS
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    More about this item

    Keywords

    Personal income tax; Tax wedge; Employment growth;
    All these keywords.

    JEL classification:

    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy

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