Fiscal Policy and Labour Market Dynamics: Evidence for Romania

Abstract:

Under the current COVID-19 pandemic, the role of effective fiscal policy is rapidly increasing worldwide in the attempt to combat the negative effects on both the labour market and the business sector. In this context, the aim of this paper consists in studying the evolution of the labour market in correlation with the latest labour taxation measures taken to face the pandemic crises. Evidence for the case of Romania is provided. Aspects concerning the national legislative framework of fiscal policies are also briefly discussed. Our analysis shows that the Romanian labour market was facing low unemployment rates in the last period, but labour force participation remained among the lowest values ​​in the European Union. Also, youth unemployment is among the highest in Europe. Forecasts of moderate levels of economic growth are radically changed following the outbreak of the COVID-19 pandemic in early 2020.