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Tax Incidence in a Model with Efficiency Wages and Unemployment

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  • Vassilis Rapanos

Abstract

The purpose of the present paper is to examine the effects of taxation on income distribution in a model with efficiency wages and involuntary unemployment. Central to our efficiency-wage model is the hypothesis that firms set wages above market-clearing levels, whenever the productivity of labor depends on the real wage paid by the firm, and unemployment. Within a two sector general equilibrium model we study the incidence of factor and commodity taxes on income distribution, and unemployment. Our findings differ substantially from those derived by the traditional neoclassical analysis, originally developed by Harberger, and as it has been extended by several authors.

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  • Vassilis Rapanos, 2006. "Tax Incidence in a Model with Efficiency Wages and Unemployment," International Economic Journal, Taylor & Francis Journals, vol. 20(4), pages 477-494.
    • Handle: RePEc:taf:intecj:v:20:y:2006:i:4:p:477-494
    DOI: 10.1080/10168730601027070
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    References listed on IDEAS

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    1. Fullerton, Don & Metcalf, Gilbert E., 2002. "Tax incidence," Handbook of Public Economics, in: A. J. Auerbach & M. Feldstein (ed.), Handbook of Public Economics, edition 1, volume 4, chapter 26, pages 1787-1872, Elsevier.
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    10. Joseph E. Stiglitz, 1984. "Theories of Wage Rigidity," NBER Working Papers 1442, National Bureau of Economic Research, Inc.
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    12. Bo Sandemann Rasmussen, 2002. "Efficiency Wages and the Long-Run Incidence of Progressive Taxation;," Journal of Economics, Springer, vol. 76(2), pages 155-175, June.
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    Cited by:

    1. Heutel, Garth & Zhang, Xin, 2021. "Efficiency wages, unemployment, and environmental policy," Energy Economics, Elsevier, vol. 104(C).

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    More about this item

    Keywords

    Tax incidence; efficiency wages;

    JEL classification:

    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • H22 - Public Economics - - Taxation, Subsidies, and Revenue - - - Incidence

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