Advanced Search
MyIDEAS: Login to save this paper or follow this series

Optimal tax progressivity in unionised labour markets; what are the driving forces?

Contents:

Author Info

  • Stefan Boeters

    ()

Abstract

In labour markets with collective wage bargaining, progressivity of the labour income tax creates a trade-off that allows the degree of progressivity to be determined optimally. On the one hand, wages are lowered and unemployment decreases, on the other hand, the individual labour supply decision is distorted at the hours-of-work margin. The optimal level of tax progressivity within this trade-off is determined using a numerical general equilibrium model with imperfect competition on the goods market, collective wage bargaining and a labour-supply module calibrated to empirically plausible elasticity values. The model is calibrated to macroeconomic and institutional parameters of both the OECD average and a number of individual OECD countries. In most cases the optimal degree of tax progressivity is below the actual level. A decomposition approach shows that the optimal level is increased by high unemployment and by the general tax level.

Download Info

If 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.
File URL: http://www.cpb.nl/sites/default/files/publicaties/download/optimal-tax-progressivity-unionised-labour-markets-what-are-driving-forces.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CPB Netherlands Bureau for Economic Policy Analysis in its series CPB Discussion Paper with number 129.

as in new window
Length:
Date of creation: Oct 2009
Date of revision:
Handle: RePEc:cpb:discus:129

Contact details of provider:
Postal: Postbus 80510, 2508 GM Den Haag
Phone: (070) 338 33 80
Fax: (070) 338 33 50
Email:
Web page: http://www.cpb.nl/
More information through EDIRC

Related research

Keywords:

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, Elsevier, vol. 52(1), pages 1-29, August.
  2. Erkki Koskela & Ronnie Schöb, 2007. "Tax Progression under Collective Wage Bargaining and Individual Effort Determination," CESifo Working Paper Series 2024, CESifo Group Munich.
  3. Holmlund, B. & Kolm, A.S., 1995. "Progressive Taxation, Wage Setting and Unemployment - Theory and Swedish Evidence," Papers, Uppsala - Working Paper Series 15, Uppsala - Working Paper Series.
  4. Michiel Evers & Ruud A. de Mooij & Daniel J. van Vuuren, 2006. "What explains the Variation in Estimates of Labour Supply Elasticities?," Tinbergen Institute Discussion Papers, Tinbergen Institute 06-017/3, Tinbergen Institute.
  5. A. Lans Bovenberg & Johan J. Graafland & Ruud A. de Mooij, 1998. "Tax Reform and the Dutch Labor Market: An Applied General Equilibrium Approach," NBER Working Papers 6693, National Bureau of Economic Research, Inc.
  6. Kees Folmer, 2009. "Why do macro wage elasticities diverge? A meta analysis," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 122, CPB Netherlands Bureau for Economic Policy Analysis.
  7. Clemens Fuest & Bernd Huber, . "Tax Progression and Human Capital in Imperfect Labour Markets," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 98-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  8. Sorensen, Peter Birch, 1999. "Optimal tax progressivity in imperfect labour markets," Labour Economics, Elsevier, Elsevier, vol. 6(3), pages 435-452, September.
  9. Arntz, Melanie & Boeters, Stefan & Gürtzgen, Nicole & Schubert, Stefanie, 2006. "Analysing welfare reform in a microsimulation-AGE model: the value of disaggregation," ZEW Discussion Papers, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research 06-76, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  10. Enrique G. Mendoza & Assaf Razin & Linda L. Tesar, 1994. "Effective Tax Rates in Macroeconomics: Cross-Country Estimates of Tax Rates on Factor Incomes and Consumption," NBER Working Papers 4864, National Bureau of Economic Research, Inc.
  11. Henrik Jacobsen Kleven & Peter Birch S¯rensen, 2004. "Labour Tax Reform, the Good Jobs and the Bad Jobs," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 106(1), pages 45-64, 03.
  12. Christopher Pissarides, 1997. "The impact of employment tax cuts on unemployment and wages : the role of unemployment benefits and tax structure," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 2332, London School of Economics and Political Science, LSE Library.
  13. Hersoug, Tor, 1984. "Union Wage Responses to Tax Changes," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 37-51, March.
  14. Stefan Boeters & Michael Feil, 2009. "Heterogeneous Labour Markets in a Microsimulation–AGE Model: Application to Welfare Reform in Germany," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 33(4), pages 305-335, May.
  15. Kleven, Henrik & Kreiner, Claus Thustrup, 2006. "The Marginal Cost of Public Funds: Hours of Work versus Labor Force Participation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5594, C.E.P.R. Discussion Papers.
  16. Stefan Boeters, 2004. "Green Tax Reform and Employment: The Interaction of Profit and Factor Taxes," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, Mohr Siebeck, Tübingen, vol. 60(2), pages 222-, August.
  17. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS), University of Warwick, Department of Economics 64, University of Warwick, Department of Economics.
  18. P. B. Sørensen, 1997. "Public finance solutions to the European unemployment problem?," Economic Policy, CEPR;CES;MSH, CEPR;CES;MSH, vol. 12(25), pages 221-264, October.
  19. Fuest, Clemens & Huber, Bernd, 2001. "Tax progression and human capital in imperfect labour markets," Munich Reprints in Economics, University of Munich, Department of Economics 20291, University of Munich, Department of Economics.
  20. Rolf Aaberge & Ugo Colombino & Erling Holmøy & Birger Strøm & Tom Wennemo, 2004. "Population ageing and fiscal sustainability: An integrated micro-macro analysis of required tax changes," Discussion Papers, Research Department of Statistics Norway 367, Research Department of Statistics Norway.
  21. Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, Elsevier, vol. 3(1), pages 65-80, August.
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 in new window

Cited by:
  1. Stefan Boeters & Luc Savard, 2012. "The Labour Market in CGE Models," CPB Discussion Paper, CPB Netherlands Bureau for Economic Policy Analysis 201, CPB Netherlands Bureau for Economic Policy Analysis.
  2. Boeters, Stefan & Savard, Luc, 2013. "The Labor Market in Computable General Equilibrium Models," Handbook of Computable General Equilibrium Modeling, Elsevier, Elsevier.
  3. Stefan Boeters, 2013. "Optimal Tax Progressivity in Unionised Labour Markets: Simulation Results for Germany," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 41(4), pages 447-474, April.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:cpb:discus:129. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

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.