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Progressive Taxation and Wage Setting When Unions Strategically Interact

Oxford Economic Papers, Vol. 59, Issue 1, pp. 127-140, 2007

Posted: 29 Feb 2008

See all articles by Giorgio Brunello

Giorgio Brunello

University of Padua - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)

Daniela Sonedda

University College London - Department of Economics; Universita degli Studi del Piemonte Orientale "Amedeo Avogadro" - Dipartimento di Scienze Economiche e Metodi Quantitativi

Date Written: January 2007

Abstract

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.

Keywords: JEL classifications: H24

Suggested Citation

Brunello, Giorgio and Sonedda, Daniela, Progressive Taxation and Wage Setting When Unions Strategically Interact (January 2007). Oxford Economic Papers, Vol. 59, Issue 1, pp. 127-140, 2007, Available at SSRN: https://ssrn.com/abstract=1098699 or http://dx.doi.org/10.1093/oep/gpl027

Giorgio Brunello (Contact Author)

University of Padua - Department of Economics ( email )

via Del Santo 33
35121 Padova
Italy
+39 049 827 4223 (Phone)
+39 049 827 4221 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

Daniela Sonedda

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Universita degli Studi del Piemonte Orientale "Amedeo Avogadro" - Dipartimento di Scienze Economiche e Metodi Quantitativi ( email )

Via Perrone 18
28100 Novara
Italy

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