Commodity Taxes, Wage Determination and Profits
AbstractWe examine the effects of two different types of commodity taxation, specific and ad valorem, on wages and profits. We analyze two models of wage determination, one with efficiency wage setting and one with bargaining between a union and a firm. In the former, a (locally) revenue-neutral shift from specific to ad valorem taxation leads to an increase in both employment and wages, and a reduction in profitability. In the bargaining case however, the effect on wages and profits may be reversed: predominantly ad valorem taxation raises employment but lowers wages, and under certain circumstances, the net effect can lead to an increase in profits.
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Bibliographic InfoPaper provided by Department of Economics, University of Kent in its series Studies in Economics with number 9816.
Date of creation: Oct 1998
Date of revision:
Contact details of provider:
Postal: Department of Economics, University of Kent at Canterbury, Canterbury, Kent, CT2 7NP
Phone: +44 (0)1227 764000
Fax: +44 (0)1227 827850
Web page: http://www.ukc.ac.uk/economics/
Other versions of this item:
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
- H32 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Firm
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
- J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
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