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Public Provision of Private Goods and Equilibrium Unemployment

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  • Aronsson, Thomas

    ()
    (Department of Economics, Umeå University)

  • Markström, Mikael

    ()
    (Department of Economics, Umeå University)

  • Sjögren, Tomas

    ()
    (Department of Economics, Umeå University)

Abstract

This paper concerns public provision of a private good in a two-type model with optimal nonlinear income taxation. We assume that the wage rates are determined by bargaining between unions and firms, meaning that the equilibrium is characterized by unemployment. We show that, if the labor market is imperfectly competitive, additional mechanisms arise via the self-selection constraint, which may justify either more or less public provision of the private good than under perfect competition. Furthermore, public provision of private goods becomes a tool to influence the employment.

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Bibliographic Info

Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 628.

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Length: 21 pages
Date of creation: 27 Feb 2004
Date of revision:
Handle: RePEc:hhs:umnees:0628

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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
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Web page: http://www.econ.umu.se/
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Keywords: Public provision of private goods; nonlinear taxation; unemployment;

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