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On the Provision of Public Goods in an Economy with Union Wage Setting and Distortionary Taxation


  • Aronsson, Thomas

    () (Department of Economics, Umeå University)

  • Löfgren, Karl-Gustaf

    () (Department of Economics, Umeå University)

  • Sjögren, Tomas

    () (Department of Economics, Umeå University)


This paper concerns public good provision under distortionary labor income taxation. The labor market is characterized by imperfect competition due to the influence of unions over wage formation. We show that a tradeoff between employment and hours of work per employee influences the welfare effect of an increase in the provision of the public good. This tradeoff means that the welfare gain of an increase in the hours of work, which is associated with the preexisting labor income tax, will be counteracted by a welfare cost in terms of lost employment. We also show how the welfare effect of an increase in the provision of the public good depends on whether the unions are able to directly affect the hours of work per employed union member, or if this influence only comes indirectly via the wage rate.

Suggested Citation

  • Aronsson, Thomas & Löfgren, Karl-Gustaf & Sjögren, Tomas, 2002. "On the Provision of Public Goods in an Economy with Union Wage Setting and Distortionary Taxation," Umeå Economic Studies 581, Umeå University, Department of Economics.
  • Handle: RePEc:hhs:umnees:0581

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    References listed on IDEAS

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    5. Caroline Minter Hoxby, 1994. "Do Private Schools Provide Competition for Public Schools?," NBER Working Papers 4978, National Bureau of Economic Research, Inc.
    6. Boylan, T. A. & Cuddy, M. P. & O'Muircheartaigh, I., 1980. "The functional form of the aggregate import demand equation : A comparison of three European economies," Journal of International Economics, Elsevier, vol. 10(4), pages 561-566, November.
    7. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Applications to Poisson Models," Econometrica, Econometric Society, vol. 52(3), pages 701-720, May.
    8. Brannas, Kurt, 1995. "Prediction and control for a time-series count data model," International Journal of Forecasting, Elsevier, vol. 11(2), pages 263-270, June.
    9. Kennedy, Peter, 1991. "An Extension of Mixed Estimation, with an Application to Forecasting New Product Growth," Empirical Economics, Springer, vol. 16(4), pages 401-415.
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    More about this item


    Public goods; distortionary taxation; union wage setting.;

    JEL classification:

    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J60 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - General

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