The Relationship between Tax Wedge and Unemployment in the Selected OECD Countries

There are many factors affecting the unemployment rate. Most of these factors are economic. One of these economic factors is tax wedge. According to the studies in the literature, it is claimed that an increase in the tax wedge has an increasing effect on the unemployment rate. In this study, since there is cross sectional dependency, tax wedge-unemployment relationship in the selected OECD countries, which are in the developing country category according to the MSCI classification, is analyzed by using Konya (2006) Panel Causality Test in the period of 2000-2017 with annual data. The empirical results show that there exists a unidirectional causality running from tax wedge to unemployment in Hungary, Mexico and Poland.