Fiscal Norming of Wages to Promote Employment with Monopoly Unions
AbstractThe paper analyses how a firm-level tax (or subsidy) calculated on the average wage relative to a pre-set norm may promote employment. We assume a monopoly union setting wages at the firm level to maximize that part of the wage bill exceeding the reservation wage. The fiscal device affects union perception of labour demand and induces it to quote a lower wage and obtain a higher corresponding level of employment. Empirical tests are performed over a sample of 43 Polish firms in 1990 and 1991. They support our model assumptions as well as the ‘employment-enhancing’ effect of the tax in Polish firms.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1766.
Date of creation: Dec 1997
Date of revision:
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Find related papers by JEL classification:
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
- H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
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- Grosfeld, Irena & Nivet, Jean-Francois, 1999. "Insider power and wage setting in transition: Evidence from a panel of large Polish firms, 1988-1994," European Economic Review, Elsevier, vol. 43(4-6), pages 1137-1147, April.
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