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Fiscal Norming of Wages to Promote Employment with Monopoly Unions

Author

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  • de Crombrugghe, Alain L
  • de Walque, Gregory

Abstract

The paper analyses how a firm-level tax (or subsidy) calculated on the average wage relative to a pre-set norm may promote employment. We assume a monopoly union setting wages at the firm level to maximize that part of the wage bill exceeding the reservation wage. The fiscal device affects union perception of labour demand and induces it to quote a lower wage and obtain a higher corresponding level of employment. Empirical tests are performed over a sample of 43 Polish firms in 1990 and 1991. They support our model assumptions as well as the ‘employment-enhancing’ effect of the tax in Polish firms.

Suggested Citation

  • de Crombrugghe, Alain L & de Walque, Gregory, 1997. "Fiscal Norming of Wages to Promote Employment with Monopoly Unions," CEPR Discussion Papers 1766, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1766
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    Citations

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    Cited by:

    1. Alain de Crombrugghe & Gregory de Walque, 2011. "Wage and employment effects of a wage norm : The Polish transition experience," Working Paper Research 209, National Bank of Belgium.
    2. Grosfeld, Irena & Nivet, Jean-Francois, 1999. "Insider power and wage setting in transition: Evidence from a panel of large Polish firms, 1988-1994," European Economic Review, Elsevier, vol. 43(4-6), pages 1137-1147, April.

    More about this item

    Keywords

    fiscal incentives; monopoly unions; Poland; wage norm;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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