IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_295.html
   My bibliography  Save this paper

International Spillover Effects of Sectoral Tax Differentiation in Unionized Economies

Author

Listed:
  • Bertil Holmlund
  • Ann-Sofie Kolm

Abstract

The European Union has recently proposed sectoral tax differentiation as a policy to fight unemployment. The member countries are allowed to reduce the VAT rates on goods and services that are particularly labor intensive and price elastic. The paper provides a theoretical analysis of the effects of such tax reforms, with particular emphasis on the international repercussions of the policies. To that end we develop a two-country and two-sector model with monopolistic competition in the goods market and wage bargaining in the labor market. Policy externalities operate through the endogenously determined terms of trade. We examine how national and supranational commodity tax policies affect sectoral and total employment and characterize optimal commodity taxes with and without international policy cooperation. Some rough estimates of the welfare gains from policy coordination are also presented, using a calibrated version of the model.

Suggested Citation

  • Bertil Holmlund & Ann-Sofie Kolm, 2000. "International Spillover Effects of Sectoral Tax Differentiation in Unionized Economies," CESifo Working Paper Series 295, CESifo.
    • Handle: RePEc:ces:ceswps:_295
    as

    Download full text from publisher

    File URL: https://www.cesifo.org/DocDL/cesifo_wp295.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jan Sørensen, 1994. "Market integration and imperfect competition in labor and product markets," Open Economies Review, Springer, vol. 5(1), pages 115-130, March.
    2. Devereux, Michael B, 1991. "The Terms of Trade and the International Coordination of Fiscal Policy," Economic Inquiry, Western Economic Association International, vol. 29(4), pages 720-736, October.
    3. Danthine, Jean-Pierre & Hunt, Jennifer, 1994. "Wage Bargaining Structure, Employment and Economic Integration," Economic Journal, Royal Economic Society, vol. 104(424), pages 528-541, May.
    4. Bertil Holmlund & Ann-Sofie Kolm, 2000. "Environmental Tax Reform in a Small Open Economy With Structural Unemployment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(3), pages 315-333, May.
    5. Rauch, James E., 1999. "Networks versus markets in international trade," Journal of International Economics, Elsevier, vol. 48(1), pages 7-35, June.
    6. Keen, Michael & Lahiri, Sajal, 1998. "The comparison between destination and origin principles under imperfect competition," Journal of International Economics, Elsevier, vol. 45(2), pages 323-350, August.
    7. Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January.
    8. Lockwood, Ben, 1993. "Commodity tax competition under destination and origin principles," Journal of Public Economics, Elsevier, vol. 52(2), pages 141-162, September.
    9. Holmlund, B. & Kolm, A.-S., 1999. "Economic Integration, Imperfect Competition, and International Policy Coordination," Papers 1999:7, Uppsala - Working Paper Series.
    10. Driffill, John & van der Ploeg, Frederick, 1993. "Monopoly Unions and the Liberalisation of International Trade," Economic Journal, Royal Economic Society, vol. 103(417), pages 379-385, March.
    11. Huizinga, Harry, 1993. " International Market Integration and Union Wage Bargaining," Scandinavian Journal of Economics, Wiley Blackwell, vol. 95(2), pages 249-255.
    12. van der ploeg, F., 1987. "Coordination of optimal taxation in a two-country equilibrium model," Economics Letters, Elsevier, vol. 24(3), pages 279-285.
    13. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
    14. Kolm, Ann-Sofie, 1998. "Differentiated payroll taxes, unemployment, and welfare," Journal of Public Economics, Elsevier, vol. 70(2), pages 255-271, November.
    15. Andersen, Torben M. & Sorensen, Jan Rose, 1995. "Unemployment and fiscal policy in an economic and monetary union," European Journal of Political Economy, Elsevier, vol. 11(1), pages 27-43, March.
    16. Driffill, John & van der Ploeg, Frederick, 1995. " Trade Liberalization with Imperfect Competition in Goods and Labour Markets," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 223-243, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jan Boone & Peter Fredriksson & Bertil Holmlund & Jan C. van Ours, 2007. "Optimal Unemployment Insurance with Monitoring and Sanctions," Economic Journal, Royal Economic Society, vol. 117(518), pages 399-421, March.
    2. Engstrom, P. & Holmlund, B. & Kolm, A.-S., 2001. "Optimal Taxation in Search Equilibrium with Home Production," Papers 2001:19, Uppsala - Working Paper Series.
    3. Vahagn Davtyan & Haykaz Igityan, 2021. "Structural Reforms in DSGE Model," Working Papers 17, Central Bank of the Republic of Armenia.
    4. Hennessy Peter & Warin Thierry, 2004. "One Welfare State for Europe: A Costly Utopia?," Global Economy Journal, De Gruyter, vol. 4(2), pages 1-17, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Holmlund, B. & Kolm, A.-S., 1999. "Economic Integration, Imperfect Competition, and International Policy Coordination," Papers 1999:7, Uppsala - Working Paper Series.
    2. Jakob Munch & Jan Sørensen, 2000. "Competitiveness and Integration of Product Markets," Open Economies Review, Springer, vol. 11(4), pages 359-381, October.
    3. Kjell Erik Lommerud & Frode Meland & Lars S¯rgard, 2003. "Unionised Oligopoly, Trade Liberalisation and Location Choice," Economic Journal, Royal Economic Society, vol. 113(490), pages 782-800, October.
    4. Straume, Odd Rune, 2003. "International mergers and trade liberalisation: implications for unionised labour," International Journal of Industrial Organization, Elsevier, vol. 21(5), pages 717-735, May.
    5. Straume, Odd Rune, 2002. "Union collusion and intra-industry trade," International Journal of Industrial Organization, Elsevier, vol. 20(5), pages 631-652, May.
    6. Alain Borghijs & Sjef Ederveen & Ruud de Mooij, 2003. "European wage coordination; nightmare or dream to come true? An economic analysis of wage bargaining institutions in the EU," CPB Discussion Paper 17, CPB Netherlands Bureau for Economic Policy Analysis.
    7. Michele Santoni, 2009. "Does product market integration lead to decentralised wage bargaining institutions?," UNIMI - Research Papers in Economics, Business, and Statistics unimi-1091, Universitá degli Studi di Milano.
    8. Torben Andersen & Jan Skaksen, 2007. "Labour Demand, Wage Mark-ups and Product Market Integration," Journal of Economics, Springer, vol. 92(2), pages 103-135, October.
    9. Naylor, Robin, 1998. "International trade and economic integration when labour markets are generally unionised," European Economic Review, Elsevier, vol. 42(7), pages 1251-1267, July.
    10. Marianna Belloc, 2009. "International Specialization and Labor Unions: Evidence from OECD Countries," Review of International Economics, Wiley Blackwell, vol. 17(1), pages 34-50, February.
    11. Santoni, Michele, 2014. "Product market integration and wage bargaining institutions," Labour Economics, Elsevier, vol. 27(C), pages 1-15.
    12. Andreas HaufLer & Guttorm Schjelderup & Frank Stähler, 2005. "Barriers to Trade and Imperfect Competition: The Choice of Commodity Tax Base," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 12(3), pages 281-300, May.
    13. Torben M. Andersen, 2003. "Wage formation and European integration," European Economy - Economic Papers 2008 - 2015 188, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    14. Hyun-Ju Koh & Ferdinand Mittermaier, 2009. "The winner gives it all: Unions, tax competition and offshoring," Working Papers 079, Bavarian Graduate Program in Economics (BGPE).
    15. Andreas Haufler & Ferdinand Mittermaier, 2011. "Unionisation Triggers Tax Incentives to Attract Foreign Direct Investment," Economic Journal, Royal Economic Society, vol. 121(553), pages 793-818, June.
    16. BORGHIJS, Alain & DU CAJU, Philip, 1999. "EMU and European trade union cooperation," Working Papers 1999013, University of Antwerp, Faculty of Business and Economics.
    17. Paolo Epifani & Gino Gancia, 2005. "On Globalization and the Growth of Governments," Working Papers 267, Barcelona School of Economics.
    18. Paolo Epifani & Gino Gancia, 2009. "Openness, Government Size and the Terms of Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 76(2), pages 629-668.
    19. Hartmut Egger & Daniel Etzel, 2012. "Union Wage Setting and International Trade," IAAEU Discussion Papers 201209, Institute of Labour Law and Industrial Relations in the European Union (IAAEU).
    20. Domenico Buccella, 2011. "Labor unions and economic integration: A review," Económica, Instituto de Investigaciones Económicas, Facultad de Ciencias Económicas, Universidad Nacional de La Plata, vol. 0, pages 25-89, January-D.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_295. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.