A Cross-Country Analysis of the Tax-Push Hypothesis
AbstractThis paper presents a microeconomic theoretical model of union optimizing behavior which is then used to test the relevance of the tax-push hypothesis for wage formation in nine Western European countries. Two factors—the compensation and the progressivity effects—are shown by the model to account for the effect (if any) of tax rates on wage formation. A wage equation tested for the period 1960-1988 shows that in general small open economies have negligible compensation and progressivity effects, while in larger economies direct, indirect and social security tax rates are transferred onto the real labor cost. All countries show a weakening of the tax shifting starting at the end of the 1970s or the beginning of the 1980s.
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Bibliographic InfoPaper provided by International Monetary Fund in its series IMF Working Papers with number 92/11.
Date of creation: 01 Feb 1992
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- Stephen Nickell, 2004.
"Employment and Taxes,"
CEP Discussion Papers, Centre for Economic Performance, LSE
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- Stephen Nickell, 2003. "Employment and Taxes," CESifo Working Paper Series 1109, CESifo Group Munich.
- Stephen Nickell, 2004. "Employment and taxes," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 19955, London School of Economics and Political Science, LSE Library.
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