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Taxation, Unemployment and Working Time in Models of Economic Growth

  • Felix R. FitzRoy
  • Michael Funke

    (Hamburg)

  • Michael A. Nolan

This paper combines collective bargaining over wages and working time with models of endogenous and neoclassical growth. Public expenditure is funded by taxes on capital and labour supplied by infinitely-lived households in a closed economy. Taxes on labour are generally inefficient in both growth models, there is a “dynamic Laffer Curve”, and employment is increased by a reduction of working hours below the collective bargaining level – except in the case of a monopoly union. Although growth is maximised by competitive (efficient) hours, welfare-optimal working time is below the collective bargain when union are ‘too weak’, and vice-versa.

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File URL: http://www.st-andrews.ac.uk/economics/papers/dp0112.pdf
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Paper provided by Department of Economics, University of St. Andrews in its series Discussion Paper Series, Department of Economics with number 200112.

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Date of creation: 15 Dec 2001
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Handle: RePEc:san:wpecon:0112
Contact details of provider: Postal: School of Economics and Finance, University of St. Andrews, Fife KY16 9AL
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Web page: http://www.st-andrews.ac.uk/economics/

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  1. Marimon, R. & Zilibotti, F., 1999. "Employment and Distributional Effects of Restricting Working Time," Economics Working Papers eco99/19, European University Institute.
  2. Daveri, Francesco & Tabellini, Guido, 1997. "Unemployment, Growth and Taxation in Industrial Countries," CEPR Discussion Papers 1681, C.E.P.R. Discussion Papers.
  3. Jonas Agell & Mats Persson, 2000. "On the Analytics of the Dynamic Laffer Curve," CESifo Working Paper Series 383, CESifo Group Munich.
  4. Agell, Jonas & Persson, Mats, 2000. "On Analytics of the Dynamic Laffer Curve," Seminar Papers 682, Stockholm University, Institute for International Economic Studies.
  5. Terry J. Fitzgerald, 1998. "Reducing working hours: a general equilibrium analysis," Working Paper 9801, Federal Reserve Bank of Cleveland.
  6. G Houpis, 1993. "The Effect of Lower Hours of Work on Wages and Employment," CEP Discussion Papers dp0131, Centre for Economic Performance, LSE.
  7. Felix R. FitzRoy & Michael Funke & Michael A. Nolan, 1999. "Working Time, Taxation and Unemployment," Discussion Paper Series, Department of Economics 199901, Department of Economics, University of St. Andrews.
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