Labour Taxation and the Degree of Centralisation in a Trade Union Model with Endogenous Labour Supply
This paper considers the effect of labour taxation on wages and employment in a trade union model with endogenous working hours. In the model, individuals choose working hours with a given wage rate, competitive firms decide on employment taking wages and working hours as given and a monopoly union sets wages allowing for the response of both workers and firms. Heads and hours are assumed to be perfect substitutes in production. The government collects taxes on wages and uses the revenue to finance unemployment benefits and public good. Having derived the results of the conventional decentralised union model we show that when the centralised union perceives the link between taxes paid and public good provided, it will lead to wage moderation and higher employment. Also, wages and employment are shown to be less sensitive to increases in the wage taxation in the centralised union case. In the extreme, if individual worker's marginal utility from public good is sufficiently high, a tax increase can even improve employment. This somewhat surprising result arises because labour supply effect dominates the wage effect on labour demand.
|Date of creation:||30 Mar 2001|
|Contact details of provider:|| Postal: Arkadiankatu 7, P.O. Box 1279, FI-00101 Helsinki|
Phone: +358 295 519 400
Fax: +358 295 519 599
Web page: http://www.vatt.fi/
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
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.:
- Driffill, John & van der Ploeg, Frederick, 1993. "Monopoly Unions and the Liberalisation of International Trade," Economic Journal, Royal Economic Society, vol. 103(417), pages 379-385, March.
- Francesco Daveri & Guido Tabellini, 2000.
"Unemployment, growth and taxation in industrial countries,"
CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
- Francesco Daveri & Guido Tabellini, "undated". "Unemployment, Growth and Taxation in Industrial Countries," Working Papers 122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
- Jaakko Kiander & Juha Kilponen & Jouko Vilmunen, 2000. "Taxes, Growth and Unemployment in the OECD Countries - Does Collective Bargaininig Matter?," Discussion Papers 235, Government Institute for Economic Research Finland (VATT).
- Koskela, Erkki & Schob, Ronnie, 1999. "Alleviating unemployment:: The case for green tax reforms," European Economic Review, Elsevier, vol. 43(9), pages 1723-1746, October.
- Jaakko Kiander & Pasi Holm & Erkki Koskela, 1995. "Unions, Labour supply and Structure of Taxation: Equal Tax Bases," Discussion Papers 110, Government Institute for Economic Research Finland (VATT).
When requesting a correction, please mention this item's handle: RePEc:fer:dpaper:250. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anita Niskanen)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.