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Optimal Taxation and Employment Policy with a Centralized Wage Settin g

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  • Palokangas, Tapio

Abstract

Public policy is examined where the economy-wide labor and employer organizations bargain about wages. The main findings are as follo ws: employment subsidies must fall with the elasticity for the demand for labor but payroll subsidies on inputs which are not fully employ ed must rise with it; these subsidies must be uniform in all sectors and when optimally set, they will equalize all union wages as well as all producer wages for unemployed labor; and the government should p ay such unemployment benefits that the marginal utilities of income f or the employed and the unemployed become equal. Copyright 1987 by Royal Economic Society.

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  • 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.
    • Handle: RePEc:oup:oxecpp:v:39:y:1987:i:4:p:799-812
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    Cited by:

    1. Aronsson, Thomas & Wikström, Magnus, 2011. "Optimal Tax Progression: Does it Matter if Wage Bargaining is Centralized or Decentralized?," Umeå Economic Studies 829, Umeå University, Department of Economics.
    2. Clemens Fuest & Bernd Huber, 1997. "Wage bargaining, labor-tax progression, and welfare," Journal of Economics, Springer, vol. 66(2), pages 127-150, June.
    3. Clemens Fuest & Bernd Huber, 1999. "Tax Coordination and Unemployment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(1), pages 7-26, February.
    4. Albert Jan Hummel & Bas Jacobs, 2018. "Optimal Income Taxation in Unionized Labor Markets," CESifo Working Paper Series 7188, CESifo.
    5. Palokangas, Tapio K., 2003. "Optimal Taxation with Capital Accumulation and Wage Bargaining," IZA Discussion Papers 966, Institute of Labor Economics (IZA).
    6. Van de gaer, Dirk & Schokkaert, Erik & De Bruyne, Guido, 1997. "Inequality aversion, macroeconomic objectives and the marginal welfare cost of indirect taxation Does flexibility of prices and wages matter?," European Journal of Political Economy, Elsevier, vol. 13(2), pages 315-341, May.
    7. Nelly Exbrayat & Carl Gaigné & Stéphane Riou, 2012. "The effects of labour unions on international capital tax competition," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 45(4), pages 1480-1503, November.
    8. Hummel, Albert Jan & Jacobs, Bas, 2023. "Optimal income taxation in unionized labor markets," Journal of Public Economics, Elsevier, vol. 220(C).
    9. Tapio Palokangas, 2020. "Public policy, footloose capital, and union influence," Review of International Economics, Wiley Blackwell, vol. 28(4), pages 976-991, September.
    10. Tapio Palokangas, 2014. "Optimal Capital Taxation, Labour Unions, and the Hold-Up Problem," LABOUR, CEIS, vol. 28(4), pages 359-375, December.

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