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Tax Coordination and Unemployment

  • Clemens Fuest
  • Bernd Huber

This paper analyses the implications of unemployment for fiscal competition and tax coordination among small open economies. Unemployment is modeled as resulting from wage bargaining. The analysis focuses on the effect of labour and capital tax coordination on welfare. We show that, while coordinated capital and labour tax increases unambiguously raise welfare if labour markets are competitive, different results emerge if labour markets are unionised. It turns out that coordinated capital and labour tax increases may reduce welfare. Copyright Kluwer Academic Publishers 1999

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File URL: http://hdl.handle.net/10.1023/A:1008666919052
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Article provided by Springer & International Institute of Public Finance in its journal International Tax and Public Finance.

Volume (Year): 6 (1999)
Issue (Month): 1 (February)
Pages: 7-26

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Handle: RePEc:kap:itaxpf:v:6:y:1999:i:1:p:7-26
DOI: 10.1023/A:1008666919052
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  1. Oates, Wallace E. & Schwab, Robert M., 1988. "Economic competition among jurisdictions: efficiency enhancing or distortion inducing?," Journal of Public Economics, Elsevier, vol. 35(3), pages 333-354, April.
  2. Palokangas, Tapio, 1987. "Optimal Taxation and Employment Policy with a Centralized Wage Settin g," Oxford Economic Papers, Oxford University Press, vol. 39(4), pages 799-812, December.
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  5. GABSZEWICZ, Jean J. & VAN YPERSELE, Tanguy, 1994. "Social Protection and Political Competition," CORE Discussion Papers 1994057, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  8. MINTZ, Jacques & TULKENS , Henry, 1994. "Optimality Properties of Alternative Systems of Taxation of Foreign Capital Income," CORE Discussion Papers 1994078, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  11. Hersoug, Tor, 1985. " Workers versus Government-Who Adjusts to Whom?," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 270-92.
  12. McDonald, Ian M & Solow, Robert M, 1981. "Wage Bargaining and Employment," American Economic Review, American Economic Association, vol. 71(5), pages 896-908, December.
  13. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  14. Oswald, Andrew J., 1993. "Efficient contracts are on the labour demand curve : Theory and facts," Labour Economics, Elsevier, vol. 1(1), pages 85-113, June.
  15. Jeremy Edwards & Michael Keen, 1994. "Tax competition and Leviathon," IFS Working Papers W94/07, Institute for Fiscal Studies.
  16. Lockwood, Ben, 1990. "Tax Incidence, Market Power, and Bargaining Structure," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 187-209, January.
  17. Bucovetsky, Sam & Wilson, John Douglas, 1991. "Tax competition with two tax instruments," Regional Science and Urban Economics, Elsevier, vol. 21(3), pages 333-350, November.
  18. Bernd Huber, 1997. "Optimal Capital Income Taxes and Capital Controls in Small Open Economies," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(1), pages 7-24, January.
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