Tax Progression under Collective Wage Bargaining and Individual Effort Determination
AbstractWe study the impact of tax policy on wage negotiations, workers’ effort, employment, output and welfare when workers’ effort is only imperfectly observable. We show that the different wage-setting motives – rent sharing and effort incentives – reinforce the effects of partial tax policy measures but not necessarily those of more fundamental tax reforms. Although a higher degree of tax progression always leads to wage moderation, the well-established result from the wage bargaining literature that a revenue-neutral increase in the degree of tax progression is good for employment does not carry over to the case with wage negotiations and imperfectly observable effort. While it remains true that introducing tax progression increases employment and output, we cannot rule out negative effects from an increase in tax progression when tax progression is already very high. Welfare effects are ambiguous a priori but we derive sufficient conditions for welfare improving revenue-neutral increases in tax progression.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 2024.
Date of creation: 2007
Date of revision:
wage bargaining; effort determination; tax progression;
Other versions of this item:
- Erkki Koskela & Ronnie Schöb, 2012. "Tax Progression under Collective Wage Bargaining and Individual Effort Determination," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(3), pages 749-771, 07.
- Koskela, Erkki & Schöb, Ronnie, 2006. "Tax progression under collective wage bargaining and individual effort determination," Discussion Papers, Research Unit: Market Processes and Governance SP II 2006-13, Social Science Research Center Berlin (WZB).
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Benjamin Bental & Dominique Demougin, 2006. "Institutions, Bargaining Power and Labor Shares," SFB 649 Discussion Papers SFB649DP2006-009, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Erkki Koskela & Ronnie Schöb, 1999.
"Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining?,"
203, Government Institute for Economic Research Finland (VATT).
- Koskela, Erkki & Schob, Ronnie, 1999. "Does the composition of wage and payroll taxes matter under Nash bargaining?," Economics Letters, Elsevier, vol. 64(3), pages 343-349, September.
- Koskela, E. & Schob, R., 1998. "Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining," University of Helsinki, Department of Economics 443, Department of Economics.
- Koskela, Erkki & Schob, Ronnie, 2002.
" Optimal Factor Income Taxation in the Presence of Unemployment,"
Journal of Public Economic Theory,
Association for Public Economic Theory, vol. 4(3), pages 387-404.
- Koskela, Erkki & Schöb, Ronnie, 2001. "Optimal Factor Income Taxation in the Presence of Unemployment," Discussion Papers 758, The Research Institute of the Finnish Economy.
- Erkki Koskela & Ronnie Schöb, 2000. "Optimal Factor Income Taxation in the Presence of Unemployment," CESifo Working Paper Series 279, CESifo Group Munich.
- José Ramón García & José Vicente Ríos, 2004. "Effects Of Tax Reforms In A Shirking Model With Union Bargaining," Working Papers. Serie AD 2004-42, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
- Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, vol. 3(1), pages 65-80, August.
- Bulkley, George & Myles, Gareth D., 1997. "Bargaining over effort," European Journal of Political Economy, Elsevier, vol. 13(2), pages 375-384, May.
- Lindbeck, A. & Snower, D.J., 1990.
"Interactions between the Efficiency Wage and Insider- Outsider Theories,"
474, Stockholm - International Economic Studies.
- Lindbeck, Assar & Snower, Dennis J., 1991. "Interactions between the efficiency wage and insider-outsider theories," Economics Letters, Elsevier, vol. 37(2), pages 193-196, October.
- Diamond, Peter A & Yaari, Menahem, 1972. "Implications of the Theory of Rationing for Consumer Choice Under Uncertainty," American Economic Review, American Economic Association, vol. 62(3), pages 333-43, June.
- Bulkley, George & Myles, Gareth D, 1996. "Trade Unions, Efficiency Wages, and Shirking," Oxford Economic Papers, Oxford University Press, vol. 48(1), pages 75-88, January.
- Sanfey, Peter J., 1993. "On the interaction between efficiency wages and union-firm bargaining models," Economics Letters, Elsevier, vol. 41(3), pages 319-324.
- Altenburg, Lutz & Straub, Martin, 1998. "Efficiency Wages, Trade Unions, and Employment," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 726-46, October.
- Garino, Gaia & Martin, Christopher, 2000.
"Efficiency wages and union-firm bargaining,"
Elsevier, vol. 69(2), pages 181-185, November.
- Goerke, Laszlo, 1999. "Efficiency Wages and Taxes," Australian Economic Papers, Wiley Blackwell, vol. 38(2), pages 131-42, June.
- Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
- Stefan Boeters, 2009.
"Optimal tax progressivity in unionised labour markets; what are the driving forces?,"
CPB Discussion Paper
129, CPB Netherlands Bureau for Economic Policy Analysis.
- Boeters, Stefan, 2011. "Optimal tax progressivity in unionised labour markets: What are the driving forces?," Economic Modelling, Elsevier, vol. 28(5), pages 2282-2295, September.
- Boeters, Stefan, 2009. "Optimal tax progressivity in unionised labour markets: what are the driving forces?," ZEW Discussion Papers 09-065, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
- Bas, Maria & Ledezma, Ivan, 2007.
"Market Access and the Evolution of within Plant Productivity in Chile,"
Economics Papers from University Paris Dauphine
123456789/6913, Paris Dauphine University.
- Maria Bas & Ivan Ledezma, 2007. "Market Access and the Evolution of within Plant Productivity in Chile," CESifo Working Paper Series 2077, CESifo Group Munich.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Julio Saavedra).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.