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Optimal tax progression: does it matter whether wage bargaining is decentralized or centralized?
Umeå University, Faculty of Social Sciences, Department of Economics.
Umeå University, Faculty of Social Sciences, Department of Economics.
2011 (English)Report (Other academic)
Abstract [en]

We study how the optimal use of labor income tax progression depends on whether the wage bargaining system is decentralized or centralized. Assuming a nonlinear labor income tax and an unrestricted profit tax, we show that a Utilitarian government is able to implement the first best resource allocation with a zero marginal labor income tax rate under decentralized wage bargaining, whereas centralized bargaining typically implies a progressive tax as well as unemployment. However, if the government and a (central) wage-setter bargain over wage formation and public policy, the resulting equilibrium is characterized by full employment and a zero marginal tax rate.

Place, publisher, year, edition, pages
2011. , 21 p.
Series
Umeå economic studies, ISSN 0348-1018 ; 829
Keyword [en]
Optimal taxation, tax progressivity, wage bargaining, corporatism
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-47546OAI: oai:DiVA.org:umu-47546DiVA: diva2:442907
Available from: 2011-09-22 Created: 2011-09-22 Last updated: 2011-11-11Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf