Labour Market Performance in EU Member States: A Panel Regression Approach

Abstract

 Abstract—This paper deals with labour market institutions and their influence on labour market performance in the EU Member States. We perform an econometric analysis to estimating the impact of various institutional aspects on the employment rate, the unemployment rate and the long-term unemployment rate. Our econometric analysis suggests that two institutional factors significantly influence unemployment and long-term unemployment: total tax wedge on labour and active labor market policies. While higher tax burden significantly increases the unemployment rate, active labor market policies work in the opposite direction and may offset the negative effect of high taxation of labour.