Program and Development Research

Program and Development Research

The Asymmetric Impact of Labor Taxation on Unemployment in Iran

Document Type : Original Article

Authors
1 Master's student, theoretical economics, Faculty of Economics and Management, University of Tabriz, Tabriz, Iran.
2 Associate Professor, Faculty of Economic and Management, University of Tabriz, Tabriz, Iran (Corresponding Author).
3 Professor of Economics, Faculty of Economic and Management, University of Tabriz, Tabriz, Iran.
Abstract
The impact of taxation on the economy is multifaceted and plays a critical role in shaping a country's financial landscape. However, inappropriate tax levels and structures can have adverse effects on the behavior of economic variables, including consumer spending, business investment, and growth and employment. In this study, the asymmetric effects of labor taxation on unemployment rates in Iran over the period 1355–1402 (1976–2023) are examined using the Nonlinear Autoregressive Distributed Lag (NARDL) approach. The estimation results indicate that, in the short term, the effects of both positive and negative tax shocks are insignificant. However, in the long term (after approximately five years), positive labor tax shocks have a significant positive effect on the unemployment rate. Conversely, the results show that the effects of negative shocks are not significant. According to the findings of this study, per capita GDP has a significantly negative impact on the unemployment rate. Moreover, the effects of minimum wage and inflation on the unemployment rate are also negative and statistically significant.
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