The Response of Labour Taxation to Changes in Government Debt
25 Pages Posted: 7 Mar 2011
Date Written: February 24, 2011
This paper investigates the relationship between government debt and labour taxation for a panel of 18 EU countries over the period 1979-2008. The econometric estimates point to a statistically significant and economically relevant positive response of labour taxation to changes in the general government debt and interest expenditure-to-GDP ratios. The results are robust across a range of econometric specifications and labour tax indicators.
Keywords: Debt, labour taxes, fiscal adjustment
JEL Classification: H2, H24, H63, J22
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