Analysis of the Relationship Between Tax Burden and Labor Force Participation Rates in OECD Countries
Abstract
The labor force participation rate has become a vital indicator for economies, especially after the industrial revolution. Because of the mass production after the industrial revolution, the necessity of raw materials increased, which also brought a rise in labor demand. Thus, the labor force partici- pation rate and its determinants have become essential subjects for policymakers. The purpose of the study is to find out and evaluate the effect of the tax burden on labor force participation rate in Organisation for Economic Co-operation and Development (OECD) countries. The selected countries are determined in accordance with the availability of the data. Panel data estimations were implemented to data set, and due to cross-sectional dependency and autocorrelation prob- lems, the GLS period SURestimation method and cross-sectional covariance methods were used. The findings revealed that tax burden has a negative and significant impact on the labor force participation rate.
Keywords
Labor force participation rate , OECD , period SUR model , tax burden
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