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The impact of Union Power on the Optimal Income Tax Schedule


    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and ERMES, Université Paris II)

We explain the positive correlation between union power and tax progressivity from a normative point of view by integrating labour market frictions and union power in an optimal taxation framework. We find that unions and redistributive taxation are complementary in the sense that they both create inefficiencies that weaken each other. We find that strong unions incease welfare and efficiency when the government faces in adverse selection problem when redistributing income.

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Paper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 2004034.

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Date of creation: 01 Oct 2004
Date of revision:
Handle: RePEc:ctl:louvir:2004034
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  1. Boone, Jan & Bovenberg, Lans, 2002. "Optimal labour taxation and search," Journal of Public Economics, Elsevier, vol. 85(1), pages 53-97, July.
  2. Tuomala, Matti, 1990. "Optimal Income Tax and Redistribution," OUP Catalogue, Oxford University Press, number 9780198286059, July.
  3. Hersoug, Tor, 1984. "Union Wage Responses to Tax Changes," Oxford Economic Papers, Oxford University Press, vol. 36(1), pages 37-51, March.
  4. HARITON, Cyril & PIASER, Gwenaël, 2004. "When redistribution leads to regressive taxation," CORE Discussion Papers 2004020, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Robin Boadway & Katherine Cuff & Maurice Marchand, 1999. "Optimal Income Taxation With Quasi-Linear Preferences Revisited," Working Papers 984, Queen's University, Department of Economics.
  6. Meltzer, Allan H & Richard, Scott F, 1981. "A Rational Theory of the Size of Government," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 914-27, October.
  7. Emmanuel Saez, 2002. "Optimal Income Transfer Programs: Intensive versus Extensive Labor Supply Responses," The Quarterly Journal of Economics, Oxford University Press, vol. 117(3), pages 1039-1073.
  8. Mathias, HUNGERBUELHER & Etienne, LEHMANN & Alexis PARMENTIER & Bruno VAN DER LINDEN, 2003. "Optimal Income Taxation in an Equilibrium Unemployment Model : Mirrlees meets Pissarides," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  9. Sorensen, Peter Birch, 1999. "Optimal tax progressivity in imperfect labour markets," Labour Economics, Elsevier, vol. 6(3), pages 435-452, September.
  10. Richard Blundell & Thomas MaCurdy, 1998. "Labour supply: a review of alternative approaches," IFS Working Papers W98/18, Institute for Fiscal Studies.
  11. Aronsson, Thomas & Sjögren, Tomas, 2001. "Income Taxation, Commodity Taxation and Provision of Public Goods under Labor Market Distortions," Umeå Economic Studies 568, Umeå University, Department of Economics.
  12. J. A. Mirrlees, 1971. "An Exploration in the Theory of Optimum Income Taxation," Review of Economic Studies, Oxford University Press, vol. 38(2), pages 175-208.
  13. Teulings,Coen & Hartog,Joop, 2008. "Corporatism or Competition?," Cambridge Books, Cambridge University Press, number 9780521049399.
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