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Taxation, Unemployment and Working Time in Models of Economic Growth

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  • Felix R. FitzRoy
  • Michael Funke

    (Hamburg)

  • Michael A. Nolan

Abstract

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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Bibliographic Info

Paper provided by Department of Economics, University of St. Andrews in its series Discussion Paper Series, Department of Economics with number 200112.

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Date of creation: 15 Dec 2001
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Handle: RePEc:san:wpecon:0112

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Keywords: Taxation; unemployment; working time; growth.;

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  1. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
  2. Felix R. FitzRoy & Michael Funke & Michael A. Nolan, 1999. "Working Time, Taxation and Unemployment," Discussion Paper Series, Department of Economics 199901, Department of Economics, University of St. Andrews.
  3. Agell, Jonas & Persson, Mats, 2000. "On the Analytics of the Dynamic Laffer Curve," Working Paper Series 2000:5, Uppsala University, Department of Economics.
  4. G Houpis, 1993. "The Effect of Lower Hours of Work on Wages and Employment," CEP Discussion Papers dp0131, Centre for Economic Performance, LSE.
  5. Marimon, Ramon & Zilibotti, Fabrizio, 2000. "Employment and distributional effects of restricting working time," European Economic Review, Elsevier, vol. 44(7), pages 1291-1326, June.
  6. Agell, Jonas & Persson, Mats, 2000. "On Analytics of the Dynamic Laffer Curve," Seminar Papers 682, Stockholm University, Institute for International Economic Studies.
  7. Terry J. Fitzgerald, 1998. "Reducing working hours: a general equilibrium analysis," Working Paper 9801, Federal Reserve Bank of Cleveland.
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