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Progressive Taxation and Wage Setting when Unions Strategically Interact

  • Giorgio Brunello

    ()

    (University of Padua)

  • Daniela Sonedda

    (Universita' del Piemonte Orientale)

In a multisector economy with unionized labor markets, the interdependence of union wage claims - typical of industrial bargaining - affects the relationship between tax progressivity and wage pressure, which varies in a nonlinear fashion with the nature of the wage bargain, and can be hump-shaped. Our empirical analysis of 20 OECD countries for the period 1997-2004 shows that higher tax progressivity increases pre-tax wages (and unemployment) in countries characterized by industry level wage bargaining, and reduces them in countries with local or fully centralized bargaining.

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File URL: http://economia.unipd.it/sites/decon.unipd.it/files/20060017.pdf
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Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0017.

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Length: 21 pages
Date of creation: May 2006
Date of revision:
Handle: RePEc:pad:wpaper:0017
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