How Does Taxation Affect Hours Worked in EU New Member States?

June 17, 2019

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Format: Chicago

Agustin Velasquez, and Svetlana Vtyurina. How Does Taxation Affect Hours Worked in EU New Member States?, (USA: International Monetary Fund, 2019) accessed December 21, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

Hours worked vary widely across countries and over time. In this paper, we investigate the role played by taxation in explaining these differences for EU New Member States. By extending a standard growth model with novel data on consumption and labor taxes, we assess the evolution of trends in hours worked over the 1995-2017 period. We find that the inclusion of tax rates in the model significantly improves the tracking of hours. We also estimate the elasticity of hours (and its different margins) to quantify the deadweight loss introduced by consumption and labor taxes. We find that these taxes explain a large share of labor supply differences across EU New Member States and that the potential gains from policy actions are noteworthy.

Subject: Consumption taxes, Labor, Labor taxes, Personal income tax, Social security contributions, Taxes

Keywords: Consumption share, Consumption tax, Consumption taxes, Consumption-output ratio, Effect of social security contributions, EU new member states, Global, Group 1, Hours worked, Income tax, Labor income, Labor market, Labor outcome, Labor supply, Labor tax, Labor taxes, Mkt regulation, Personal income, Personal income tax, Real purchasing power, Social security contribution rate, Social security contributions, Tax labor, Tax rate, Tax wedge, Utility function, WP

Publication Details

Pages:

35
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2019/130
Stock No:

WPIEA2019130
ISBN:

9781498315708
ISSN:

1018-5941

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