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The effects of labour unions on international capital tax competition

Author

Listed:
  • Nelly Exbrayat

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique, UJM - Université Jean Monnet - Saint-Étienne)

  • Carl Gaigné

    (SMART-LERECO - Structures et Marché Agricoles, Ressources et Territoires - INRA - Institut National de la Recherche Agronomique - AGROCAMPUS OUEST, CREATE, Centre de Recherche en économie de l'Environnement, de l'Agroalimentaire, des Transports et de l'Énergie - ULaval - Université Laval [Québec])

  • Stéphane Riou

    (GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique, UJM - Université Jean Monnet - Saint-Étienne)

Abstract

We analyze the impact of labour market rigidities on tax competition betweentwo imperfectly integrated countries. Following a shift from a competitive to a unionizedlabour market in both countries, the capital tax can be adjusted upward in the countrywith the less rigid labour market, whereas the capital tax is always adjusted downward inthe other country. Moreover, by reducing the labour cost differential between countries,trade liberalization gives rise to tax and welfare convergences. Finally, when a countryadopts a flexible labour market, the unionized country may attract the majority of capital.

Suggested Citation

  • Nelly Exbrayat & Carl Gaigné & Stéphane Riou, 2012. "The effects of labour unions on international capital tax competition," Post-Print hal-01208838, HAL.
    • Handle: RePEc:hal:journl:hal-01208838
    DOI: 10.1111/j.1540-5982.2012.01746.x
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    Cited by:

    1. Gillet Holger & Pauser Johannes, 2018. "Public Input Provision in Asymmetric Regions with Labor Market Imperfections," German Economic Review, De Gruyter, vol. 19(4), pages 466-492, December.
    2. Andrea Schneider, 2017. "Corporate Taxation of Heterogeneous Firms and the Welfare Effects of Labour Unions," The World Economy, Wiley Blackwell, vol. 40(4), pages 703-714, April.
    3. Yuya Kikuchi & Toshiki Tamai, 2025. "Correction to: Unemployment and endogenous choice on tax instruments in a tax competition model: unit tax versus ad valorem tax," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 32(3), pages 916-917, June.
    4. Sangwha Shin & Sang-Hyun Kim, 2022. "Tax Competition under Imperfect Labor Market," Korean Economic Review, Korean Economic Association, vol. 38, pages 141-166.
    5. Toshiki Tamai & Gareth Myles, 2022. "Unemployment, tax competition, and tax transfer policy," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 24(3), pages 470-503, June.
    6. Yuya Kikuchi & Toshiki Tamai, 2024. "Nash equilibria in models of fiscal competition with unemployment," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 26(2), February.
    7. Tadashi MORITA & Yukiko SAWADA & Kazuhiro YAMAMOTO, 2016. "Subsidy Competition, Imperfect Labor Market, and Endogenous Entry of Firms," Discussion papers 16096, Research Institute of Economy, Trade and Industry (RIETI).
    8. Hikaru Ogawa & Yasuhiro Sato & Toshiki Tamai, 2016. "Who gains from capital market integration? Tax competition between unionized and non-unionized countries," Canadian Journal of Economics, Canadian Economics Association, vol. 49(1), pages 76-110, February.
    9. Tadashi MORITA & Yoshitomo OGAWA & Yoshiyasu ONO, 2017. "Corporate Tax Competition in the Presence of Unemployment," Discussion papers 17118, Research Institute of Economy, Trade and Industry (RIETI).
    10. Nelly Exbrayat & Benny Geys, 2014. "Trade integration and corporate income tax differentials," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 21(2), pages 298-323, April.
    11. Nelly Exbrayat, 2016. "Does trade liberalization trigger tax competition? Theory and evidence from OECD countries," Working Papers 1620, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    12. Yuya Kikuchi & Toshiki Tamai, 2019. "Tax competition, unemployment, and intergovernmental transfers," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 26(4), pages 899-918, August.
    13. Kangoh Lee, 2021. "Labor market frictions, capital, taxes and employment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 28(6), pages 1329-1359, December.
    14. Yuya Kikuchi & Arihiro Kuzawa & Toshiki Tamai, 2026. "Unemployment, Fiscal Competition, and the Composition of Public Expenditure," Public Finance Review, , vol. 54(1), pages 87-109, January.
    15. Exbrayat, Nelly & Geys, Benny, 2012. "Trade integration and business tax differentials: Evidence from OECD countries," Discussion Papers, Research Professorship & Project "The Future of Fiscal Federalism" SP II 2012-110, WZB Berlin Social Science Center.
    16. Gillet, Holger & Pauser, Johannes, 2014. "Efficiency in public input provision in two asymmetric jurisdictions with imperfect labour markets," IAB-Discussion Paper 201411, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    17. Sebastian Krautheim & Tim Schmidt-Eisenlohr, 2016. "Wages and International Tax Competition," Review of International Economics, Wiley Blackwell, vol. 24(5), pages 893-923, November.
    18. Mittermaier, Ferdinand & Rincke, Johannes, 2013. "Do countries compensate firms for international wage differentials?," Journal of Public Economics, Elsevier, vol. 102(C), pages 23-36.
    19. Nelly Exbrayat & Benny Geys, 2016. "Economic Integration, Corporate Tax Incidence and Fiscal Compensation," The World Economy, Wiley Blackwell, vol. 39(11), pages 1792-1811, November.
    20. Pauser, Johannes, 2020. "Congestion, wage rigidities and the provision of public intermediate goods," VfS Annual Conference 2020 (Virtual Conference): Gender Economics 224625, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies

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