Union Strategy and Optimal Income Taxation
IZA Discussion Paper No. 1545
24 Pages Posted: 11 Apr 2005
Date Written: March 2005
Restrictions on work hours are more important in countries with a large welfare state. We show that this empirical observation is consistent with the strategic effects of such restrictions in a welfare state in the context of optimal direct taxation in the tradition of Mirrlees (1971). Our results also apply to non-welfarist states which have income redistribution, but not in purely extortionary states.
Keywords: optimal income taxation, labor unions, work hours
JEL Classification: H21, H23
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