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Tax Coordination and Unemployment

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Author Info

  • 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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File URL: http://hdl.handle.net/10.1023/A:1008666919052
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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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References

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  1. Oswald, A. J., 1995. "Efficient contracts are on the labour demand curve: Theory and facts," Labour Economics, Elsevier, vol. 2(1), pages 102-102, March.
  2. Edwards, Jeremy & Keen, Michael, 1996. "Tax competition and Leviathan," European Economic Review, Elsevier, vol. 40(1), pages 113-134, January.
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  9. Keen, M. & Marchand, M., . "Fiscal competition and the pattern of public spending," CORE Discussion Papers RP -1284, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  10. Hersoug, Tor, 1984. "Union Wage Responses to Tax Changes," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 37-51, March.
  11. Lockwood, Ben, 1990. "Tax Incidence, Market Power, and Bargaining Structure," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 187-209, January.
  12. 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.
  13. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
  14. 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.
  15. Hersoug, Tor, 1985. " Workers versus Government-Who Adjusts to Whom?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 270-92.
  16. 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.
  17. 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.
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