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Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining? Author info | Abstract | Publisher info | Download info | Related research | Statistics Erkki Koskela
Ronnie Schöb
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Using the Nash bargaining approach to wage negotiations this paper shows that conventional wisdom, according to which the total tax wedge is the sum of wage and payroll taxes, is valid for equal tax bases, e.g., when the tax exemption takes the form of a tax credit. However, the equivalence result ceases to hold when the tax bases are unequal due to tax allowances. In this case a revenue-neutral restructuring of labour taxes toward a narrower tax base decreases the gross wage and is thus good for employment.
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Paper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number
203.
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Date of creation: 01 Jan 1999Date of revision:
Handle: RePEc:fer:dpaper:203Contact details of provider: Postal: Arkadiankatu 7, P.O. Box 1279, FI-00101 Helsinki Phone: +358 40 304 5500 Fax: +358 9 4780 2929 Email: Web page: http://www.vatt.fi/ More information through EDIRC
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Keywords: Tax wedge ; payroll tax ; wage tax ; wage bargaining ; non-equivalence ; Other versions of this item:
Find related papers by JEL classification: J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
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Holm, Pasi & Honkapohja, Seppo & Koskela, Erkki, 1994.
"A monopoly-union model of wage determination with capital and taxes: An empirical application to the Finnish manufacturing ,"
European Economic Review ,
Elsevier, vol. 38(2), pages 285-303, February.
[Downloadable!] (restricted)
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.
[Downloadable!] (restricted)
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references Cited by : (explanations , 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.)
Alfonso Arpaia & Giuseppe Carone, 2004.
"Do labour taxes (and their composition) affect wages in the short and in the long run? ,"
Public Economics
0411004, EconWPA.
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Van der Linden, Bruno, 1998.
"Fighting unemployment without worsening povety: Basic income versus reductions of social security contributions ,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
1999028, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 00 Oct 1999.
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Kees Folmer, 2009.
"Why do macro wage elasticities diverge? ,"
CPB Memoranda
224, CPB Netherlands Bureau for Economic Policy Analysis.
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Sîle O'DOrchai & Robert Plasman & François Rycx, 2007.
"The part-time wage penalty in European countries:How large is it for men? ,"
Working Papers DULBEA
07-02.RS, Université libre de Bruxelles, Department of Applied Economics (DULBEA).
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Other versions: Daniel Cardona & Fernando Sánchez-Losada, 2004.
"The Unemployment Benefit System: a Redistributive or an Insurance Institution? ,"
DEA Working Papers
8, Universitat de les Illes Balears, Departament d'Economía Aplicada.
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Marja-Liisa Halko, 2004.
"Buffer funding of unemployment insurance in a dynamic labour union model ,"
Macroeconomics
0404030, EconWPA.
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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).
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Koskela, Erkki, 2008.
"The Effects of Labour Tax Progression under Nash Wage Bargaining and Flexible Outsourcing ,"
IZA Discussion Papers
3501, Institute for the Study of Labor (IZA).
[Downloadable!]
Edward Calthrop & Bruno Borger, 2007.
"On Tax Over-Shifting in Wage Bargaining Models ,"
Atlantic Economic Journal ,
International Atlantic Economic Society, vol. 35(2), pages 127-143, June.
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Jukka Lassila, 2000.
"Wage formation by majority voting and the incentive effects of pensions and taxation ,"
Finnish Economic Papers ,
Finnish Economic Association, vol. 13(2), pages 89-115, Autumn.
[Downloadable!]
Erkki Koskela & Ronnie Schöb, 2007.
"How Tax Progression Affects Effort and Employment ,"
IZA Discussion Papers
2861, Institute for the Study of Labor (IZA).
[Downloadable!]
Kees Folmer, 2009.
"Why do macro wage elasticities diverge? ,"
CPB Discussion Papers
122, CPB Netherlands Bureau for Economic Policy Analysis.
[Downloadable!]
Erkki Koskela & Ronnie Schöb, 2008.
"Outsourcing of Unionized Firms and the Impacts of Labour Market Policy Reforms ,"
CESifo Working Paper Series
CESifo Working Paper No. , CESifo Group Munich.
[Downloadable!]
Other versions: Erkki Koskela & Ronnie Schöb, 2007.
"Tax Progression under Collective Wage Bargaining and Individual Effort Determination ,"
CESifo Working Paper Series
CESifo Working Paper No. , CESifo Group Munich.
[Downloadable!]
José Félix Izquierdo & Angel Melguizo & David Taguas, 2001.
"Imposición y precios de consumo ,"
Working Papers
101, BBVA Bank, Economic Research Department.
[Downloadable!]
Laszlo Goerke, 1999.
"The Wedge ,"
IZA Discussion Papers
71, Institute for the Study of Labor (IZA).
[Downloadable!]
Other versions:
Goerke, Laszlo, 2000.
"The Wedge ,"
Manchester School ,
University of Manchester, vol. 68(5), pages 608-23, September.
[Downloadable!] (restricted) José Ramón García & Hector Sala, 2006.
"The Tax System Incidence on Unemployment: A Country-Specific Analysis for the OECD Economies ,"
IZA Discussion Papers
2226, Institute for the Study of Labor (IZA).
[Downloadable!]
Other versions: Heijdra, B.J. & Ligthart, J.E., 2004.
"Labor tax reform and equilibrium unemployment : a search and matching approach ,"
Discussion Paper
89, Tilburg University, Center for Economic Research.
[Downloadable!]
Other versions: Goerke, Laszlo, 2001.
"Tax Evasion in a Unionised Economy ,"
IZA Discussion Papers
382, Institute for the Study of Labor (IZA).
[Downloadable!]
Koskela, Erkki & Stenbacka, Rune, 2000.
"Capital Structure, Wage Bargaining and Employment ,"
CESifo Working Paper Series
CESifo Working Paper No. , CESifo Group Munich.
[Downloadable!]
Halko, Marja-Liisa, 2003.
"Buffer funding of unemployment insurance in a dynamic labour union model ,"
Research Discussion Papers
24/2003, Bank of Finland.
[Downloadable!]
Ben Heijdra & Jenny Ligthart, 2009.
"Labor tax reform, unemployment, and search ,"
International Tax and Public Finance ,
Springer, vol. 16(1), pages 82-104, February.
[Downloadable!] (restricted)
Boeters, Stefan & Böhringer, Christoph & Feil, Michael, 2002.
"Taxation and unemployment : an applied general equilibrium approach for Germany ,"
ZEW Discussion Papers
02-39, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
[Downloadable!]
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