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Can Labor Market Imperfections Cause Overprovision of Public Inputs?

Author

Listed:
  • Diego Martinez

    (Department of Economics, Universidad Pablo de Olavide)

  • Tomas Sjögren

    (Department of Economics, Umeå University)

Abstract

In a model where trade unions dominate the labor market, a relationship is derived between the rate of unemployment and the provision of a public input in the production. This relationship implies that for conventional rates of unemployment, the public input will be overprovided compared to the first-best level.

Suggested Citation

  • Diego Martinez & Tomas Sjögren, 2009. "Can Labor Market Imperfections Cause Overprovision of Public Inputs?," Working Papers 09.13, Universidad Pablo de Olavide, Department of Economics.
    • Handle: RePEc:pab:wpaper:09.13
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    File URL: http://www.upo.es/serv/bib/wps/econ0913.pdf
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    References listed on IDEAS

    as
    1. Ming Chang, 2000. "Rules and Levels in the Provision of Public Goods: The Role of Complementarities between the public Good and Taxed Commodities," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(1), pages 83-91, February.
    2. Bovenberg, A. Lans & van der Ploeg, Frederick, 1996. "Optimal taxation, public goods and environmental policy with involuntary unemployment," Journal of Public Economics, Elsevier, vol. 62(1-2), pages 59-83, October.
    3. Thomas Gaube, 2007. "A note on the link between public expenditures and distortionary taxation," Economics Bulletin, AccessEcon, vol. 8(9), pages 1-10.
    4. Thomas Aronsson & Erkki Koskela, 2008. "Optimal Redistributive Taxation and Provision of Public Input Goods in an Economy with Outsourcing and Unemployment," CESifo Working Paper Series 2481, CESifo.
    5. Wilson, John Douglas, 1991. "Optimal Public Good Provision with Limited Lump-Sum Taxation," American Economic Review, American Economic Association, vol. 81(1), pages 153-166, March.
    6. Aronsson, Thomas & Wehke, Sven, 2008. "Public goods, unemployment and policy coordination," Regional Science and Urban Economics, Elsevier, vol. 38(3), pages 285-298, May.
    7. Diego Martinez Lopez & A. Jesus Sanchez Fuentes, 2006. "On the optimal level of public inputs," Working Papers 06.34, Universidad Pablo de Olavide, Department of Economics, revised Mar 2008.
    8. Gaube, Thomas, 2000. "When do distortionary taxes reduce the optimal supply of public goods?," Journal of Public Economics, Elsevier, vol. 76(2), pages 151-180, May.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Diego Martinez-Lopez & Tomas Sjöngren, 2014. "Vertical externalities with lump-sum taxes: how much difference does unemployment make?," European Journal of Government and Economics, Europa Grande, vol. 3(1), pages 75-87, June.
    2. Diego Martinez-Lopez & Tomas Sjöngren, 2014. "Vertical externalities with lump-sum taxes: how much difference does unemployment make?," European Journal of Government and Economics, Europa Grande, vol. 3(1), pages 75-87, June.

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    More about this item

    Keywords

    Public Inputs; Trade Unions.;

    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

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