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Taxes, social insurance contributions, and undeclared labour in unionized oligopoly

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  • Vlassis, Minas
  • Mamakis, Stefanos
  • Varvataki, Maria

Abstract

This paper studies the phenomenon of undeclared labour. In a unionized duopoly with decentralized wage setting and proportional taxation we show that a trade-off exists for employers between contributing to social insurance for their employees and incurring taxes on labour. The configuration among the tax and social insurance contribution rates may thus generate undeclared labour in equilibrium. Nonetheless, those rates can be handled by a social planner so as to tackle undeclared labour at no cost to social welfare, but with welfare distributive consequences.

Suggested Citation

  • Vlassis, Minas & Mamakis, Stefanos & Varvataki, Maria, 2019. "Taxes, social insurance contributions, and undeclared labour in unionized oligopoly," Economics Letters, Elsevier, vol. 183(C), pages 1-1.
    • Handle: RePEc:eee:ecolet:v:183:y:2019:i:c:37
    DOI: 10.1016/j.econlet.2019.108585
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    References listed on IDEAS

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    1. Emmanuel Petrakis & Minas Vlassis, 2004. "Endogenous wage bargaining institutions in oligopolistic sectors," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 24(1), pages 55-73, July.
    2. Edoardo Di Porto & Leandro Elia, 2015. "Estimating Labor Demand Function in the Presence of Undeclared Labour: A Look Behind the Curtain," CSEF Working Papers 389, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
    3. Bruno Chiarini & Elisabetta Marzano, 2009. "Interaction between Underground Employment and Unions in Selected Italian Industries," Revue économique, Presses de Sciences-Po, vol. 60(5), pages 1155-1180.
    4. Colin C. Williams & Jan Windebank, 2005. "Eliminating undeclared work: beyond a deterrence approach," Journal of Economic Studies, Emerald Group Publishing, vol. 32(5), pages 435-449, October.
    5. A. Jorge Padilla & Samuel Bentolila & Juan J. Dolado, 1996. "Wage Bargaining in Industries with Market Power," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 5(4), pages 535-564, December.
    6. Minas Vlassis, 2003. "Wage Centralization and the Scope of Firm–Union Bargaining: ‘Efficient Bargains’ or ‘Labour Demand’?," Manchester School, University of Manchester, vol. 71(3), pages 308-329, June.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Undeclared labour; Unionized cournot duopoly; Labour unions;
    All these keywords.

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy

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