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Tax Coordination and Unemployment

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  • Clemens Fuest
  • Bernd Huber

Abstract

This paper analyses the implications of unemployment for fiscal competition and tax coordination among small open economies. Unemployment is modeled as resulting from wage bargaining. The analysis focuses on the effect of labour and capital tax coordination on welfare. We show that, while coordinated capital and labour tax increases unambiguously raise welfare if labour markets are competitive, different results emerge if labour markets are unionised. It turns out that coordinated capital and labour tax increases may reduce welfare. Copyright Kluwer Academic Publishers 1999

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Bibliographic Info

Article provided by Springer in its journal International Tax and Public Finance.

Volume (Year): 6 (1999)
Issue (Month): 1 (February)
Pages: 7-26

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Handle: RePEc:kap:itaxpf:v:6:y:1999:i:1:p:7-26

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Web page: http://www.springerlink.com/link.asp?id=102915

Related research

Keywords: tax competition; tax coordination; unemployment; wage bargaining; capital mobility;

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  2. MINTZ, Jacques & TULKENS , Henry, 1994. "Optimality Properties of Alternative Systems of Taxation of Foreign Capital Income," CORE Discussion Papers 1994078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  9. John Creedy & Ian M McDonald, 1989. "Trade Unions, wages and taxation," Fiscal Studies, Institute for Fiscal Studies, vol. 10(3), pages 50-59, August.
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  11. Hersoug, Tor, 1984. "Union Wage Responses to Tax Changes," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 37-51, March.
  12. Wildasin, David E., 1989. "Interjurisdictional capital mobility: Fiscal externality and a corrective subsidy," Journal of Urban Economics, Elsevier, vol. 25(2), pages 193-212, March.
  13. Brennan,Geoffrey & Buchanan,James M., 2006. "The Power to Tax," Cambridge Books, Cambridge University Press, number 9780521027922.
  14. Palokangas, Tapio, 1987. "Optimal Taxation and Employment Policy with a Centralized Wage Settin g," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 799-812, December.
  15. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
  16. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
  17. Bernd Huber, 1997. "Optimal Capital Income Taxes and Capital Controls in Small Open Economies," International Tax and Public Finance, Springer, vol. 4(1), pages 7-24, January.
  18. Huber, Bernd, 1997. "Optimal Capital Income Taxes and Capital Controls in Small Open Economies," Munich Reprints in Economics 19405, University of Munich, Department of Economics.
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