Does Centralised Wage Setting Lead into Higher Taxation?
This paper studies implications of centralised wage setting for the level of taxation and public expenditure in an analytical model with unionised labour markets. We extend the previous studies by allowing for both demand and supply effects of labour. Also, in addition to the standard social planner approach, we consider a political economy set up, where the tax rate is chosen to maximise the welfare of a median voter. Our results suggest that when working hours are endogenous, the relationship between the degree of centralisation and the labour tax rate is ambiguous. In particular, if the marginal utility from public provision is sufficiently low, centralised wage setting implies lower optimal tax rate on labour. This is due to a "budgetary discipline effect", which reduces the optimal tax rate preferred by the median voter under centralised wage setting.
|Date of creation:||22 Oct 2003|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +358 295 519 400
Fax: +358 295 519 599
Web page: http://www.vatt.fi/
More information through EDIRC
|Order Information:|| Email: |
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.:
- Francesco Daveri & Guido Tabellini, .
"Unemployment, Growth and Taxation in Industrial Countries,"
122, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR;CES;MSH, vol. 15(30), pages 47-104, 04.
- Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
- Daniele Checchi & Claudio Lucifora, 2002.
"Unions and labour market institutions in Europe,"
Departmental Working Papers
2002-16, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
- Pekka Sinko, 1999. "Taxation, Employment and the Environment - General Equilibrium Analysis with Unionised Labour Markets," Research Reports 54, Government Institute for Economic Research Finland (VATT).
- Lawrence H. Summers & Jonathan Gruber & Rodrigo Vergara, 1992.
"Taxation and the Structure of Labor Markets: The Case of Corporatism,"
NBER Working Papers
4063, National Bureau of Economic Research, Inc.
- Summers, Lawrence H & Gruber, Jonathan & Vergara, Rodrigo, 1993. "Taxation and the Structure of Labor Markets: The Case of Corporatism," The Quarterly Journal of Economics, MIT Press, vol. 108(2), pages 385-411, May.
- 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).
- Pekka Sinko & Juha Kilponen, 2001. "Labour Taxation and the Degree of Centralisation in a Trade Union Model with Endogenous Labour Supply," Discussion Papers 250, 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.
- Driffill, John & van der Ploeg, Frederick, 1993. "Monopoly Unions and the Liberalisation of International Trade," Economic Journal, Royal Economic Society, vol. 103(417), pages 379-85, March.
When requesting a correction, please mention this item's handle: RePEc:fer:dpaper:314. 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 references are entirely missing, you can add them using this form.