IDEAS home Printed from https://ideas.repec.org/p/zbw/fubsbe/200621.html
   My bibliography  Save this paper

Charity and redistributive taxation in a unionized economy

Author

Listed:
  • Corneo, Giacomo

Abstract

European economies are characterized by unionized labor markets and a pronounced governmental redistribution of income. This paper studies a model where those two features are combined with the possibility for individuals to make charitable contributions to the poor. The model exhibits equilibrium unemployment that increases with the degree of altruism. It is shown that a more progressive income tax can both reduce the unemployment rate and improve the public budget. These results are driven by charity increasing wage pressure and the altruistic rich failing to internalize the effect of their donations on the wage setting behavior of the unions.

Suggested Citation

  • Corneo, Giacomo, 2006. "Charity and redistributive taxation in a unionized economy," Discussion Papers 2006/21, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:200621
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/28046/1/521304261.PDF
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert A. Moffitt & Mark Wilhelm, 1998. "Taxation and the Labor Supply: Decisions of the Affluent," NBER Working Papers 6621, National Bureau of Economic Research, Inc.
    2. Steiner, Viktor & Corneo, Giacomo & Bach, Stefan, 2007. "From Bottom to Top: The Entire Distribution of Market Income in Germany, 1992-2001," CEPR Discussion Papers 6251, C.E.P.R. Discussion Papers.
    3. Stefan Bach & Giacomo Corneo & Viktor Steiner, 2005. "Top Incomes and Top Taxes in Germany," Discussion Papers of DIW Berlin 532, DIW Berlin, German Institute for Economic Research.
    4. Robert A. J. Dur, 2001. "The Credibility Problem in Unemployment Insurance Policy," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 157(4), pages 634-650, December.
    5. 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.
    6. Ben Lockwood & Alan Manning, 1993. "Wage Setting and the Tax System: theory and Evidence for the UK," CEP Discussion Papers dp0115, Centre for Economic Performance, LSE.
    7. Sandmo, Agnar, 1983. " Progressive Taxation, Redistribution, and Labor Supply," Scandinavian Journal of Economics, Wiley Blackwell, vol. 85(3), pages 311-323.
    8. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August.
    9. Jonas Beste & Markus M. Grabka & Jan Goebel, 2018. "Armut in Deutschland [Poverty in Germany]," AStA Wirtschafts- und Sozialstatistisches Archiv, Springer;Deutsche Statistische Gesellschaft - German Statistical Society, vol. 12(1), pages 27-62, April.
    10. Ferris, J Stephen & West, Edwin G, 2003. "Private versus Public Charity: Reassessing Crowding Out from the Supply Side," Public Choice, Springer, vol. 116(3-4), pages 399-417, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Koulovatianos, Christos & Schrder, Carsten & Schmidt, Ulrich, 2009. "Nonmarket Household Time and the Cost of Children," Journal of Business & Economic Statistics, American Statistical Association, vol. 27, pages 42-51.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kjell Erik Lommerud & Bjørn Sandvik & Odd Rune Straume, 2004. "Good Jobs, Bad Jobs and Redistribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 703-720, December.
    2. Florian Dorn & Clemens Fuest & Björn Kauder & Luisa Lorenz & Martin Mosler & Luisa Dörr, 2017. "The removal of the middle class bulge - models and costs," ifo Forschungsberichte, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 77.
    3. Knut Røed & Steinar Strøm, 2002. "Progressive Taxes and the Labour Market: Is the Trade–off Between Equality and Efficiency Inevitable?," Journal of Economic Surveys, Wiley Blackwell, vol. 16(1), pages 77-110, February.
    4. Erkki Koskela & Ronnie Schöb, 2002. "Alleviating Unemployment: The Case for Green Tax Reforms," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 20, pages 355-378, Edward Elgar Publishing.
    5. Daniel Cardona & Fernando Sánchez-Losada, 2004. "The Unemployment Benefit System: a Redistributive or an Insurance Institution?," DEA Working Papers 8, Universitat de les Illes Balears, Departament d'Economía Aplicada.
    6. Bertil Holmlund, 2002. "Labor Taxation in Search Equilibrium with Home Production," German Economic Review, Verein für Socialpolitik, vol. 3(4), pages 415-430, November.
    7. Hansen, Claus Thustrup & Pedersen, Lars Haagen & Slok, Torsten, 2000. "Ambiguous effects of tax progressivity -- theory and Danish evidence," Labour Economics, Elsevier, vol. 7(3), pages 335-347, May.
    8. Pia Rattenhuber, 2012. "Marginal Taxes: A Good or a Bad for Wages?: The Incidence of the Structure of Income and Labor Taxes on Wages," Discussion Papers of DIW Berlin 1193, DIW Berlin, German Institute for Economic Research.
    9. Albert Jan Hummel & Bas Jacobs, 2018. "Optimal Income Taxation in Unionized Labor Markets," Tinbergen Institute Discussion Papers 18-064/VI, Tinbergen Institute.
    10. Boeters, Stefan, 2011. "Optimal tax progressivity in unionised labour markets: What are the driving forces?," Economic Modelling, Elsevier, vol. 28(5), pages 2282-2295, September.
    11. Michaelis, Jochen & Birk, Angela, 2006. "Employment- and growth effects of tax reforms," Economic Modelling, Elsevier, vol. 23(6), pages 909-925, December.
    12. Bohringer, Christoph & Boeters, Stefan & Feil, Michael, 2005. "Taxation and unemployment: an applied general equilibrium approach," Economic Modelling, Elsevier, vol. 22(1), pages 81-108, January.
    13. 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.
    14. Albert Jan Hummel, 2021. "Unemployment and tax design," Tinbergen Institute Discussion Papers 21-061/VI, Tinbergen Institute.
    15. Clemens Fuest & Bernd Huber, 1997. "Wage bargaining, labor-tax progression, and welfare," Journal of Economics, Springer, vol. 66(2), pages 127-150, June.
    16. Seppo Honkapohja & Erkki Koskela, 1999. "The economic crisis of the 1990s in Finland," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 14(29), pages 400-436.
    17. 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.
    18. Hummel, Albert Jan & Jacobs, Bas, 2023. "Optimal income taxation in unionized labor markets," Journal of Public Economics, Elsevier, vol. 220(C).
    19. Koskela, Erkki & Vilmunen, Jouko, 1994. "Monopoly unions, corporatism and optimal structure of labour taxation," Bank of Finland Research Discussion Papers 17/1994, Bank of Finland.
    20. Frederick Van der Ploeg, 2004. "The Welfare State, Redistribution and the Economy, Reciprocal Altruism, Consumer Rivalry and Second Best," CESifo Working Paper Series 1234, CESifo.

    More about this item

    Keywords

    Equilibrium Unemployment; Income Tax; Charity; Trade Unions;
    All these keywords.

    JEL classification:

    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:fubsbe:200621. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ZBW - Leibniz Information Centre for Economics (email available below). General contact details of provider: https://edirc.repec.org/data/fwfubde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.