This paper provides a first assessment of the impact of labour taxation on labour market outcomes. We estimate how tax reforms are correlated with several outcome variables, including employment, unemployment and participation rates, hours worked. In order to address the impact of reforms we estimate different regression models and perform a series of robustness checks. All the results seem to point to a very weak, if any, impact of all the included policies on the macroeconomic variables considered. Also, we find that a period of one or two years is needed in order to be able to detect any policy impact on countries' macroeconomic situation. Finally, when only female workforce is considered, Personal Income Taxation reforms have increased, although marginally, female employment rates and average hours of work, while they have reduced inactivity rates.
Labour tax reforms and labour market outcomes in Europe
DEVILLANOVA, CARLO;GHISLANDI, SIMONE
2011
Abstract
This paper provides a first assessment of the impact of labour taxation on labour market outcomes. We estimate how tax reforms are correlated with several outcome variables, including employment, unemployment and participation rates, hours worked. In order to address the impact of reforms we estimate different regression models and perform a series of robustness checks. All the results seem to point to a very weak, if any, impact of all the included policies on the macroeconomic variables considered. Also, we find that a period of one or two years is needed in order to be able to detect any policy impact on countries' macroeconomic situation. Finally, when only female workforce is considered, Personal Income Taxation reforms have increased, although marginally, female employment rates and average hours of work, while they have reduced inactivity rates.
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