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Tax Incidence In A Model With Efficiency Wages And Unemployment

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  • Vassilis T Rapanos

    (Department of Economics, University of Athens)

Abstract

The purpose of the present paper is to examine the effects of taxation on income distribution in a model with efficiency wages and involuntary unemployment. Central to the efficiency-wage theory is the hypothesis that firms may set wages above market-clearing levels, whenever the productivity of labor depends positively on the real wage paid by the firm. Within a two sector general equilibrium model we study the incidence of factor and commodity taxes on income distribution. Our findings are quite different from the results derived by the traditional neoclassical analysis, originally developed by Harberger.

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File URL: http://128.118.178.162/eps/pe/papers/0404/0404001.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Public Economics with number 0404001.

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Length: 18 pages
Date of creation: 06 Apr 2004
Date of revision:
Handle: RePEc:wpa:wuwppe:0404001

Note: Type of Document - pdf; pages: 18
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Web page: http://128.118.178.162

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Keywords: tax incidence; efficiency wages;

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  1. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872 Elsevier.
  2. Levine, David, 1987. "Efficiency wages in Weitzman's share economy," Economics Letters, Elsevier, vol. 23(3), pages 245-249.
  3. Imam, M Hasan & Whalley, John, 1985. "Incidence Analysis of a Sector-specific Minimum Wage in a Two-Sector Harris-Todaro Model," The Quarterly Journal of Economics, MIT Press, vol. 100(1), pages 207-24, February.
  4. Joseph E. Stiglitz, 1984. "Theories of Wage Rigidity," NBER Working Papers 1442, National Bureau of Economic Research, Inc.
  5. Johnson, Harry G & Mieszkowski, Peter, 1970. "The Effects of Unionization on the Distribution of Income: A General Equilibrium Approach," The Quarterly Journal of Economics, MIT Press, vol. 84(4), pages 539-61, November.
  6. Agell, Jonas & Lundborg, Per, 1992. "Fair wages, involuntary unemployment and tax policies in the simple general equilibrium model," Journal of Public Economics, Elsevier, vol. 47(3), pages 299-320, April.
  7. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  8. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1267-93, December.
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