Progressive Taxation Under Centralised Wage Setting
AbstractThe study reconsiders the effects of tax progression in imperfectly competitive labour markets. Allowing for the individual supply of working hours, we show that the results derived in the standard model of decentralised wage bargaining do not hold if the wage setting is centralised or highly coordinated. We show that increased progression is more likely to harm employment if either i) the initial tax system is progressive or ii) the wage setting is centralised or co-ordinated. If the wage setting institutions are centralised or strongly co-ordinated, increased progression may be bad for employment even when departing from a proportional tax system.
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Bibliographic InfoPaper provided by Government Institute for Economic Research Finland (VATT) in its series Discussion Papers with number 349.
Date of creation: 01 Dec 2004
Date of revision:
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
- H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-07-11 (All new papers)
- NEP-LAB-2006-07-29 (Labour Economics)
- NEP-PBE-2006-07-18 (Public Economics)
- NEP-PUB-2006-07-27 (Public Finance)
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