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Union, efficiency of labour and endogenous growth

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  • Bhattacharyya, Chandril
  • Gupta, Manash Ranjan

Abstract

This paper develops an endogenous growth model with human capital formation and ‘Efficiency Wage Hypothesis’ to investigate the growth effect of unionisation and to analyse properties of optimum income tax rate in the presence of an unionised labour market and with taxation only on labour income. ‘Efficient Bargaining’ model as well as ‘Right to Manage’ model is used to solve the negotiation problem between the labour union and the employer’s association. In both type modelling framework, the growth effect of unionisation is independent of its employment effect; and it depends on its net effect on worker’s efficiency. The growth rate maximizing tax rate on labour income is different from the corresponding welfare maximizing tax rate; and the nature of the growth effect of unionisation is different from its welfare effect.

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  • Bhattacharyya, Chandril & Gupta, Manash Ranjan, 2015. "Union, efficiency of labour and endogenous growth," MPRA Paper 64911, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:64911
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    More about this item

    Keywords

    Labour union; Efficiency wage hypothesis; Human capital Formation; income tax; Endogenous growth;
    All these keywords.

    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H52 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Education
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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