Who is afraid of capital mobility? On labor taxation and the level of public services in an open economy
AbstractThis paper deals with the impact of international capital mobility on labor taxes and the size of the public sector. It employs a model of the labor market, where national trade unions arc able to set wages above the competitive level. In a closed economy, a higher labor tax raises wage demands of the unions and thus increases the distortion on the labor market. With perfect international capital mobility, competition between trade unions leads to full employment, irrespective of the labor tax rale. The distorting effect of the labor tax vanishes and governments arc able to increase the supplied quantity of public services to the first best level.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 824.
Date of creation: 1997
Date of revision:
Capital Mobility; Labor Taxation;
Find related papers by JEL classification:
- F20 - International Economics - - International Factor Movements and International Business - - - General
- J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Siebert, Horst, 2000. "The paradigm of locational competition," Kiel Discussion Papers 367, Kiel Institute for the World Economy (IfW).
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dieter Stribny).
If references are entirely missing, you can add them using this form.