This paper combines collective bargaining over wages and working time with models of endogenous and neoclassical growth. Public expenditure is funded by taxes on capital and labour supplied by infinitely-lived households in a closed economy. Taxes on labour are generally inefficient in both growth models, there is a “dynamic Laffer Curve”, and employment is increased by a reduction of working hours below the collective bargaining level – except in the case of a monopoly union. Although growth is maximised by competitive (efficient) hours, welfare-optimal working time is below the collective bargain when union are ‘too weak’, and vice-versa.
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Length: Date of creation: Dec 2001 Date of revision: Handle: RePEc:san:wpecon:0112
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Find related papers by JEL classification: J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand J6 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies H2 - Public Economics - - Taxation, Subsidies, and Revenue
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