The Response Of Labour Taxation To Changes In Government Debt

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. The global financial and economic crisis has led to rapidly rising debt ratios in most EU countries.

Provided by: European Central Bank Topic: CXO Date Added: Mar 2011 Format: PDF

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