Carone G., H. Immervoll, D. Paturot and Salomäki A. (2004): “Indicators of Unemployment and Low-Wage Traps: Marginal Effective Tax Rates on Employment Incomes”, OECD Social, Employment and Migration Working Papers.
International Monetary Fund, 2010, Slovak Republic: Staff Report for the 2010 Article IV Consultation, International Monetary Fund, Washington DC.
Prepared by Murad Omoev.
Skill levels are defined according to educational attainment: (i) low-skilled persons are those with less than lower secondary education; (ii) medium-skilled persons are those with upper secondary and post-secondary non-tertiary education, and (iii) high skilled persons are those with tertiary education.
The unemployment trap–or the implicit tax on returning to work for unemployed persons—measures the part of the additional gross wage that is taxed away in the form of increased taxes and withdrawn benefits such as unemployment benefits, social assistance, housing benefits when a person returns to work from unemployment.
The results are stronger if the outliers for northern counties of Međimurje, Varaždin, and Krapina-Zagorje are excluded from the sample. These results suggest that an increase in the minimum-to-average ratio by 10 percent is associated with a 1.65 percentage point rise in the unemployment rate among low skilled workers in a region with 25 percent low-skilled unemployment rate.