The Effects of Tax Wedges on Hours Worked and Unemployment in Sweden [electronic resource] / Alun H Thomas.
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TextSeries: IMF Working Papers; Working Paper ; No. 98/152Publication details: Washington, D.C. : International Monetary Fund, 1998Description: 1 online resource (25 p.)ISBN: 1451922744 :ISSN: 1018-5941Subject(s): Employment | Labor Cost | Payroll Taxes | Payroll | Total Labor Taxes | Unemployment | SwedenAdditional physical formats: Print Version:: The Effects of Tax Wedges on Hours Worked and Unemployment in SwedenOnline resources: IMF e-Library | IMF Book Store Abstract: The paper investigates the relationship between labor taxation and unemployment in Sweden by estimating a labor market model that includes a wage-setting locus and labor demand and supply relationships. The study simulates the effect of a 1 percentage point increase in the payroll tax and in total tax rates. The increase in the payroll tax pushes up labor costs by about 1/2 percent over a 5-10 year time horizon. Hours worked fall by 0.5 percent and the unemployment rate rises by 0.3 percentage point. The increase in total tax rates generates a similar result. Therefore, it appears that increases in taxes have adversely affected employment and unemployment in Sweden.
The paper investigates the relationship between labor taxation and unemployment in Sweden by estimating a labor market model that includes a wage-setting locus and labor demand and supply relationships. The study simulates the effect of a 1 percentage point increase in the payroll tax and in total tax rates. The increase in the payroll tax pushes up labor costs by about 1/2 percent over a 5-10 year time horizon. Hours worked fall by 0.5 percent and the unemployment rate rises by 0.3 percentage point. The increase in total tax rates generates a similar result. Therefore, it appears that increases in taxes have adversely affected employment and unemployment in Sweden.
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