Labour Market Institutions and the Cohesion of the Middle Class
We develop a simple model to study how relative wage rigidity affects equilibrium taxation. It is argued that relative wage rigidity, by compressing incomes within the middle class, leads to a lower degree of redistributive conflict within the politically important core of society, even though income inequality may increase for society as a whole. In the model, people vote first on wage rigidity and second on redistributive taxation. The rigid society has a lower tax rate than the flexible one. it is supported by the 'middle-class' in the first stage, while the poor, the rich and the unemployed suffer from it.
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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alberto Alesina & Dani Rodrik, 1991.
"Distributive Politics and Economic Growth,"
NBER Working Papers
3668, National Bureau of Economic Research, Inc.
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- Gilles Saint-Paul, 1993.
"On the Political Economy of Labor Market Flexibility,"
in: NBER Macroeconomics Annual 1993, Volume 8, pages 151-196
National Bureau of Economic Research, Inc.
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"Is Inequality Harmful for Growth,"
537, Stockholm - International Economic Studies.
- Alberto Alesina & Dani Rodrik, 1994. "Distributive Politics and Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 109(2), pages 465-490.
- Wright, Randall, 1986. "The redistributive roles of unemployment insurance and the dynamics of voting," Journal of Public Economics, Elsevier, vol. 31(3), pages 377-399, December.
- Saint-Paul, Gilles, 1994.
"Some Political Aspects of Unemployment,"
CEPR Discussion Papers
949, C.E.P.R. Discussion Papers.
- Saint-Paul, G. & Verdier, T., 1991.
"Education, Democracy and growth,"
DELTA Working Papers
91-27, DELTA (Ecole normale supérieure).
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