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Union Wage Setting and Capital Income Taxation in Dynamic General Equilibrium

Author

Listed:
  • Aronsson Thomas

    (University of Umeå,Umeå, Sweden)

  • Löfgren Karl-Gustaf

    (University of Umeå,Umeå, Sweden)

  • Sjögren Tomas

    (University of Umeå,Umeå, Sweden)

Abstract

This paper concerns the effects of capital income taxation in a dynamic general equilibrium framework with union wage setting, when households face taxes related to both labor and capital. One purpose is to characterize the general equilibrium solution. Another is to study the effects of increased capital income taxation - in terms of the responses in real wages, employment, capital stock, output and consumption - and relate these behavioral responses to the overall tax structure. We also derive a cost-benefit rule for the purpose of analyzing the welfare effects of a small shift from labor income taxation to capital income taxation.

Suggested Citation

  • Aronsson Thomas & Löfgren Karl-Gustaf & Sjögren Tomas, 2001. "Union Wage Setting and Capital Income Taxation in Dynamic General Equilibrium," German Economic Review, De Gruyter, vol. 2(2), pages 141-175, May.
    • Handle: RePEc:bpj:germec:v:2:y:2001:i:2:p:141-175
    DOI: 10.1111/1468-0475.00032
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    References listed on IDEAS

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    1. Aronsson, Thomas & Wikstrom, Magnus & Brannlund, Runar, 1997. "Wage Determination under Non-linear Taxes: Estimation and an Application to Panel Data," Oxford Economic Papers, Oxford University Press, vol. 49(3), pages 404-418, July.
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    8. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, vol. 52(1), pages 1-29, August.
    9. Hoel, M., 1989. "Income Taxes And Non-Market Clearing Wages," Memorandum 1989_009, Oslo University, Department of Economics.
    10. Calmfors, Lars, 1985. "Work sharing, employment and wages," European Economic Review, Elsevier, vol. 27(3), pages 293-309.
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    Cited by:

    1. Sjögren, Tomas, 2017. "Can a Marginally Distorted Labor Market Improve Capital Accumulation, Output and Welfare?," Umeå Economic Studies 946, Umeå University, Department of Economics.
    2. Ludger Linnemann, 2004. "Tax Base and Crowding‐in Effects of Balanced Budget Fiscal Policy," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(2), pages 273-297, June.
    3. Tapio Palokangas, 2014. "Optimal Capital Taxation, Labour Unions, and the Hold-Up Problem," LABOUR, CEIS, vol. 28(4), pages 359-375, December.
    4. Dalin, Torbjörn & Stage, Jesper, 2011. "The effects of capital income taxation on wage formation," Economics Letters, Elsevier, vol. 113(2), pages 186-188.

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