Aronsson, Thomas () (Department of Economics, Umeå University) Löfgren, Karl-Gustaf () (Department of Economics, Umeå University) Sjögren, Tomas () (Department of Economics, Umeå University)
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This paper concerns public good provision under distortionary labor income taxation. The labor market is characterized by imperfect competition due to the influence of unions over wage formation. We show that a tradeoff between employment and hours of work per employee influences the welfare effect of an increase in the provision of the public good. This tradeoff means that the welfare gain of an increase in the hours of work, which is associated with the preexisting labor income tax, will be counteracted by a welfare cost in terms of lost employment. We also show how the welfare effect of an increase in the provision of the public good depends on whether the unions are able to directly affect the hours of work per employed union member, or if this influence only comes indirectly via the wage rate.
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Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number
581.
Length: 16 pages Date of creation: 04 Feb 2002 Date of revision: Handle: RePEc:hhs:umnees:0581
Contact details of provider: Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden Phone: 090 - 786 61 42 Fax: 090 - 77 23 02 Email: Web page: http://www.econ.umu.se/ More information through EDIRC
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