Tax Progression Under Collective Wage Bargaining and Individual Effort Determination

23 Pages Posted: 23 Jun 2012

See all articles by Erkki Koskela

Erkki Koskela

University of Helsinki - Department of Political and Economic Studies; CESifo (Center for Economic Studies and Ifo Institute); Bank of Finland - Research Department; IZA Institute of Labor Economics

Ronnie Schöb

Freie Universitaet Berlin; CESifo (Center for Economic Studies and Ifo Institute)

Multiple version iconThere are 2 versions of this paper

Date Written: July 2012

Abstract

We study the impact of tax policy on wage negotiations, workers’ effort, employment, output, and welfare under imperfectly observable effort. A higher degree of tax progression always leads to wage moderation, but the well‐established result from the wage bargaining literature that a revenue‐neutral increase in the degree of tax progression is good for employment does not carry over to the case with wage negotiations and imperfectly observable effort. Introducing tax progression increases employment and output, but we cannot rule out that the negative effort effect of increasing tax progression will lead employment to fall when tax progression is already high.

JEL Classification: J41, J51, H22

Suggested Citation

Koskela, Erkki and Schöb, Ronnie, Tax Progression Under Collective Wage Bargaining and Individual Effort Determination (July 2012). Industrial Relations: A Journal of Economy and Society, Vol. 51, Issue 3, pp. 749-771, 2012. Available at SSRN: https://ssrn.com/abstract=2089656 or http://dx.doi.org/10.1111/j.1468-232X.2012.00699.x

Erkki Koskela (Contact Author)

University of Helsinki - Department of Political and Economic Studies ( email )

P.O. Box 54
FIN-00014 Helsinki
Finland
+358 9 191 8894 (Phone)
+358 9 191 8877 (Fax)

HOME PAGE: http://www.cesifo.de/servlet/page?_pageid=56&_dad=portal30&_schema=PORTAL30&pa_id=7298

CESifo (Center for Economic Studies and Ifo Institute)

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Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Bank of Finland - Research Department ( email )

P.O. Box 160
FIN-00101 Helsinki
Finland

IZA Institute of Labor Economics

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

Ronnie Schöb

Freie Universitaet Berlin ( email )

Boltzmannstraße 20
Berlin, Berlin 14195
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

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