Labor Tax Progressivity, Wage Determination, and the Relative Wage Effect

Brunello, Giorgio; Sonedda, Daniela

doi:10.2139/ssrn.316764

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Labor Tax Progressivity, Wage Determination, and the Relative Wage Effect

12 Pages Posted: 30 Jun 2002

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: May 2002

Abstract

We model a two sector economy with unionized labor markets and competitive product markets, where workers and unions care about their relative wages, and show that the presence of a relative wage concern could help generation a positive relationship between tax progressivity and wage pressure.

Keywords: Progressive Taxation, Relative Wage Effect

JEL Classification: H24, J31

Suggested Citation: Suggested Citation

Brunello, Giorgio and Sonedda, Daniela, Labor Tax Progressivity, Wage Determination, and the Relative Wage Effect (May 2002). Available at SSRN: https://ssrn.com/abstract=316764 or http://dx.doi.org/10.2139/ssrn.316764