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Effects Of Tax Reforms In A Shirking Model With Union Bargaining

  • José Ramón García

    (Dpto. Análisis Económico, Universitat de València)

  • José Vicente Ríos

    (Dpto. Análisis Económico, Universitat de València)

In this paper we introduce a progressive income tax in the shirking model with union bargaining presented by in Altenburg and Straub (2002). Indeed, we differentiate taxation on employees and employers for the fiscal policy analysis. The main results show that it is possible, with a constant revenue reform, to enhance employment by shifting the tax imposition towards lower firm taxation. And, that it is crucial to consider a proportional or progressive taxation on labour income in order to be able to analyse the effect on unemployment for a constant replacement rate.

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Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2004-42.

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Length: 21 pages
Date of creation: Nov 2004
Date of revision:
Publication status: Published by Ivie
Handle: RePEc:ivi:wpasad:2004-42
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  1. Picard, Pierre M & Toulemonde, Eric, 2001. "On the Equivalence of Taxes Paid by Employers and Employees," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(4), pages 461-70, September.
  2. Fuest, Clemens & Huber, Bernd, 2000. "Is tax progression really good for employment? A model with endogenous hours of work," Labour Economics, Elsevier, vol. 7(1), pages 79-93, January.
  3. Hoel, Michael, 1989. "Efficiency wages and local versus central wage bargaining," Economics Letters, Elsevier, vol. 30(2), pages 175-179, August.
  4. Erkki Koskela & Ronnie Schöb, 1999. "Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining?," Discussion Papers 203, Government Institute for Economic Research Finland (VATT).
  5. Christopher Martin, . "Efficiency Wages and Union-Firm Bargaining," Economics and Finance Discussion Papers 97-10, Economics and Finance Section, School of Social Sciences, Brunel University.
  6. Laszlo Goerke, 2002. "Statutory and economic incidence of labour taxes," Applied Economics Letters, Taylor & Francis Journals, vol. 9(1), pages 17-20.
  7. Sorensen, Peter Birch, 1999. "Optimal tax progressivity in imperfect labour markets," Labour Economics, Elsevier, vol. 6(3), pages 435-452, September.
  8. Pissarides, Christopher A., 1998. "The impact of employment tax cuts on unemployment and wages; The role of unemployment benefits and tax structure," European Economic Review, Elsevier, vol. 42(1), pages 155-183, January.
  9. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  10. Koskela, Erkki & Vilmunen, Jouko, 1996. "Tax progression is good for employment in popular models of trade union behaviour," Labour Economics, Elsevier, vol. 3(1), pages 65-80, August.
  11. Andersen, Torben M. & Sandemann Rasmussen, Bo, 1999. "Effort, taxation and unemployment1," Economics Letters, Elsevier, vol. 62(1), pages 97-103, January.
  12. Altenburg, Lutz & Straub, Martin, 1998. "Efficiency Wages, Trade Unions, and Employment," Oxford Economic Papers, Oxford University Press, vol. 50(4), pages 726-46, October.
  13. Sanfey, Peter J., 1993. "On the interaction between efficiency wages and union-firm bargaining models," Economics Letters, Elsevier, vol. 41(3), pages 319-324.
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