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Tax Incidence, Market Power, and Bargaining Structure

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  • Lockwood, Ben

Abstract

This paper considers the incidence of both factor taxes and an income/consumption tax in a general equilibrium model with unionized labor markets and imperfectly competitive product markets, focusing especially on the implications of different bargaining structures in the labor market for tax incidence. The determinants of tax incidence are shown to be very different from the competitive case; in particular, more than 100 percent shifting of general, as opposed to sector specific wage and income/consumption taxes is possible, and the shifting of the wage tax generally increases, rather than decreases, with the elasticity of substitution between labor and capital in production. Also, changes in firm market power and union bargaining power are shown to have counterintuitive effects on the degree of shifting of taxes. Copyright 1990 by Royal Economic Society.

Suggested Citation

  • Lockwood, Ben, 1990. "Tax Incidence, Market Power, and Bargaining Structure," Oxford Economic Papers, Oxford University Press, vol. 42(1), pages 187-209, January.
    • Handle: RePEc:oup:oxecpp:v:42:y:1990:i:1:p:187-209
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    Citations

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    Cited by:

    1. Szabolcs Deák & Lionel Fontagné & Marco Maffezzoli & Massimiliano Marcellino, 2012. "The banking and distribution sectors in a small open economy DSGE Model," RSCAS Working Papers 2012/53, European University Institute.
    2. Michele Santoni, 2000. "Specific Excise Taxation in a Unionized Differentiated Duopoly," Public Finance Review, , vol. 28(4), pages 351-371, July.
    3. Clemens Fuest & Bernd Huber, 1999. "Tax Coordination and Unemployment," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(1), pages 7-26, February.
    4. De Vito, Antonio & Pancotto, Livia & Perdichizzi, Salvatore & Reghezza, Alessio, 2023. "Don’t go on holiday in August! Market reaction to an unexpected windfall tax on banks," Economics Letters, Elsevier, vol. 233(C).
    5. Kjell Erik Lommerud & Bjørn Sandvik & Odd Rune Straume, 2004. "Good Jobs, Bad Jobs and Redistribution," Scandinavian Journal of Economics, Wiley Blackwell, vol. 106(4), pages 703-720, December.
    6. Nils aus dem Moore, 2014. "Shifting the Burden of Corporate Taxes: Heterogeneity in Direct Wage Incidence," Ruhr Economic Papers 0531, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
    7. Silvia Rocha‐Akis & Ronnie Schöb, 2011. "Welfare Policy in the Presence of Unionised Labour and Internationally Mobile Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 113(1), pages 93-119, March.
    8. Chae, Suchan, 2002. "Tax incidence with bargaining," Economics Letters, Elsevier, vol. 77(2), pages 199-204, October.
    9. repec:zbw:bofrdp:1992_023 is not listed on IDEAS
    10. Deák, Szabolcs & Fontagné, Lionel & Maffezzoli, Marco & Marcellino, Massimiliano, 2011. "LSM: A DSGE model for Luxembourg," Economic Modelling, Elsevier, vol. 28(6), pages 2862-2872.
    11. Silvia Rocha-Akis, 2006. "Labour tax policies and strategic offshoring under unionised oligopoly," Department of Economics Working Papers wuwp099, Vienna University of Economics and Business, Department of Economics.
    12. Schimmelpfennig, Axel, 1999. "Whodunnit? Changes in the relative demand for unskilled and skilled labor," Kiel Working Papers 914, Kiel Institute for the World Economy (IfW Kiel).
    13. Tyrväinen, Timo, 1992. "Tax incidence in union models," Research Discussion Papers 23/1992, Bank of Finland.
    14. Sophia Delipalla & Peter Sanfey, 2001. "Commodity Taxes, Wage Determination, and Profits," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 3(2), pages 203-217, April.
    15. Edward Calthrop & Bruno Borger, 2007. "On Tax Over-Shifting in Wage Bargaining Models," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 35(2), pages 127-143, June.
    16. Kang, Ya & Li, Oliver Zhen & Lin, Yupeng, 2021. "Tax incidence in loan pricing," Journal of Accounting and Economics, Elsevier, vol. 72(1).
    17. repec:zbw:rwirep:0531 is not listed on IDEAS
    18. Xu Zifei & Tang Xiaoxu & Cui Yan, 2009. "The Effect of Tax Policy Choices on the Labor Market on the Perspective of Global Governance," Transition Studies Review, Springer;Central Eastern European University Network (CEEUN), vol. 16(2), pages 316-327, June.
    19. Kolm, Ann-Sofie, 1998. "Differentiated payroll taxes, unemployment, and welfare," Journal of Public Economics, Elsevier, vol. 70(2), pages 255-271, November.
    20. Tyrväinen, Timo, 1992. "Tax incidence in union models," Bank of Finland Research Discussion Papers 23/1992, Bank of Finland.
    21. Kakpo, Eliakim, 2018. "The corporate tax, apportionment rules and employment: Evidence using policy discontinuity at U.S. state borders," MPRA Paper 94875, University Library of Munich, Germany.

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