Theoretical aspects of labour taxes and their effects on the labour market
2014
Dobele, L., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics and Social Development | Pilvere, I., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics and Social Development | Nipers, A., Latvia Univ. of Agriculture, Jelgava (Latvia). Faculty of Economics and Social Development
Labour taxes compose a part of the business environment, leaving potential impact on labour costs, net wages, employment, and unemployment rate. The aim of the present paper is to ascertain the effects of changes in the burden of labour taxes on the labour market seeking the answer to the question what form it could take and what could be the scale of this effect. To assess the effects of changes in the burden of labour taxes, the scientific literature was analysed and various research findings were examined and compared in the paper. The present research found that labour taxes can affect wages, the extent of engagement of employees in the labour market, the number of hours worked and labour costs, and the rates of unemployment and employment in the country. However, research works of many authors give evidence that changes in labour taxes may have different effects depending on the particular situation. It mainly depends on the approach in what way the burden of labour taxes (the average or marginal rate) is reduced and how powerful are non-governmental agents.
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