Report
Patrick Artus

What is the causal direction of the correlation between the corporate tax burden and the employment rate?

A comparison across OECD countries shows a strong negative correlation between the corporate tax burden (in particular corporate social contributions) and the employment rate. The question concerns the direction of the causality between these two variables. In one direction, a high tax burden may have a negative effect on the supply of goods and services, thereby reducing employment; In another direction, if the employment rate is low for any reason (low labour force skills, low retirement age, etc.) and income inequality before redistribution is high, redistributive policies must be large-scale, leading to a high corporate tax burden. To try to identify the direction of causality, we look at the dynamics of the tax burden and the employment rate over time in countries with a high tax burden and in countries with a low tax burden. We see that the causality probably goes from the corporate tax burden to the employment rate.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

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