IDEAS home Printed from https://ideas.repec.org/p/fer/dpaper/250.html
   My bibliography  Save this paper

Labour Taxation and the Degree of Centralisation in a Trade Union Model with Endogenous Labour Supply

Author

Listed:
  • Sinko, Pekka
  • Kilponen, Juha

Abstract

This paper considers the effect of labour taxation on wages and employment in a trade union model with endogenous working hours. In the model, individuals choose working hours with a given wage rate, competitive firms decide on employment taking wages and working hours as given and a monopoly union sets wages allowing for the response of both workers and firms. Heads and hours are assumed to be perfect substitutes in production. The government collects taxes on wages and uses the revenue to finance unemployment benefits and public good. Having derived the results of the conventional decentralised union model we show that when the centralised union perceives the link between taxes paid and public good provided, it will lead to wage moderation and higher employment. Also, wages and employment are shown to be less sensitive to increases in the wage taxation in the centralised union case. In the extreme, if individual worker's marginal utility from public good is sufficiently high, a tax increase can even improve employment. This somewhat surprising result arises because labour supply effect dominates the wage effect on labour demand.

Suggested Citation

  • Sinko, Pekka & Kilponen, Juha, 2001. "Labour Taxation and the Degree of Centralisation in a Trade Union Model with Endogenous Labour Supply," Discussion Papers 250, VATT Institute for Economic Research.
    • Handle: RePEc:fer:dpaper:250
    as

    Download full text from publisher

    File URL: https://www.doria.fi/handle/10024/148148
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Erkki Koskela & Ronnie Schöb, 2002. "Alleviating Unemployment: The Case for Green Tax Reforms," Chapters, in: Lawrence H. Goulder (ed.), Environmental Policy Making in Economies with Prior Tax Distortions, chapter 20, pages 355-378, Edward Elgar Publishing.
    2. Francesco Daveri & Guido Tabellini, 2000. "Unemployment, growth and taxation in industrial countries," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 15(30), pages 48-104.
    3. Driffill, John & van der Ploeg, Frederick, 1993. "Monopoly Unions and the Liberalisation of International Trade," Economic Journal, Royal Economic Society, vol. 103(417), pages 379-385, March.
    4. Kiander, Jaakko & Holm, Pasi & Koskela, Erkki, 1995. "Unions, Labour supply and Structure of Taxation: Equal Tax Bases," Discussion Papers 110, VATT Institute for Economic Research.
    5. Kiander, Jaakko & Kilponen, Juha & Vilmunen, Jouko, 2000. "Taxes, Growth and Unemployment in the OECD Countries - Does Collective Bargaininig Matter?," Discussion Papers 235, VATT Institute for Economic Research.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Pekka Sinko, 2005. "Does Centralised Wage Setting Lead into Higher Taxation?," Labor and Demography 0509007, University Library of Munich, Germany.
    2. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and in the long run?," Public Economics 0411004, University Library of Munich, Germany.
    3. Sinko, Pekka, 2003. "Subsidizing vs. Experience Rating of Unemployment Insurance in Unionized Labor Markets," Discussion Papers 319, VATT Institute for Economic Research.
    4. Sinko, Pekka & Kilponen, Juha, 2003. "Does Centralised Wage Setting Lead into Higher Taxation?," Discussion Papers 314, VATT Institute for Economic Research.
    5. Kiander, Jaakko & Kilponen, Juha & Vilmunen, Jouko, 2004. "Labor taxation, public finance, and wage determination: evidence from OECD countries," European Journal of Political Economy, Elsevier, vol. 20(4), pages 983-999, November.
    6. Sinko, Pekka, 2004. "Progressive Taxation Under Centralised Wage Setting," Discussion Papers 349, VATT Institute for Economic Research.
    7. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and the long run? - Alfonso Arpaia and Giuseppe Carone," European Economy - Economic Papers 2008 - 2015 216, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sinko, Pekka & Kilponen, Juha, 2003. "Does Centralised Wage Setting Lead into Higher Taxation?," Discussion Papers 314, VATT Institute for Economic Research.
    2. Pekka Sinko, 2005. "Does Centralised Wage Setting Lead into Higher Taxation?," Labor and Demography 0509007, University Library of Munich, Germany.
    3. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and in the long run?," Public Economics 0411004, University Library of Munich, Germany.
    4. Alfonso Arpaia & Giuseppe Carone, 2004. "Do labour taxes (and their composition) affect wages in the short and the long run? - Alfonso Arpaia and Giuseppe Carone," European Economy - Economic Papers 2008 - 2015 216, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    5. Sebastian Weber, 2006. "Labor Market Structures, Trade and their Effect on Unemployment: A Theoretical Analysis and Empirical Investigation," IHEID Working Papers 22-2006, Economics Section, The Graduate Institute of International Studies.
    6. Tetsuo Ono, 2008. "Environmental tax reform in an overlapping-generations economy with involuntary unemployment," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 9(4), pages 213-238, December.
    7. Chang, Juin-jen & Shaw, Ming-fu & Lai, Ching-chong, 2007. "A "Managerial" trade union and economic growth," European Economic Review, Elsevier, vol. 51(2), pages 365-384, February.
    8. José Ramón García, 2004. "Desempleo Y Estructura Impositiva En El Mercado De Trabajo De La Ocde," Working Papers. Serie EC 2004-21, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    9. Boeters, Stefan, 2002. "Tax Progressivity and the Trade Union's Fallback-Option," ZEW Discussion Papers 02-15, ZEW - Leibniz Centre for European Economic Research.
    10. Moriconi, Simone & Sato, Yasuhiro, 2009. "International commodity taxation in the presence of unemployment," Journal of Public Economics, Elsevier, vol. 93(7-8), pages 939-949, August.
    11. Sinko, Pekka, 2002. "Labour Taxation, Tax Progression and Job Matching - Comparative Alternative Models of Wage Setting," Discussion Papers 285, VATT Institute for Economic Research.
    12. Tetsuo Ono, 2010. "Growth and unemployment in an OLG economy with public pensions," Journal of Population Economics, Springer;European Society for Population Economics, vol. 23(2), pages 737-767, March.
    13. Sinko, Pekka, 2004. "Progressive Taxation Under Centralised Wage Setting," Discussion Papers 349, VATT Institute for Economic Research.
    14. Daniel Cardona & Fernando Sánchez-Losada, 2004. "The Unemployment Benefit System: a Redistributive or an Insurance Institution?," DEA Working Papers 8, Universitat de les Illes Balears, Departament d'Economía Aplicada.
    15. Luca Gori & Luciano Fanti, 2009. "Right-to-manage unions endogenous growth and welfare," Economics Bulletin, AccessEcon, vol. 29(2), pages 903-917.
    16. Bertil Holmlund, 2002. "Labor Taxation in Search Equilibrium with Home Production," German Economic Review, Verein für Socialpolitik, vol. 3(4), pages 415-430, November.
    17. Ronnie Schöb, 2003. "Workfare and Trade Unions: Labor Market Repercussions of Welfare Reform," CESifo Working Paper Series 942, CESifo.
    18. Assaf Razin & Efraim Sadka & Phillip Swagel, 2002. "The Wage Gap and Public Support for Social Security," American Economic Review, American Economic Association, vol. 92(2), pages 390-395, May.
    19. Alfò, Marco & Carbonari, Lorenzo & Trovato, Giovanni, 2023. "On the effects of taxation on growth: an empirical assessment," Macroeconomic Dynamics, Cambridge University Press, vol. 27(5), pages 1289-1318, July.
    20. Planas, Christophe & Roeger, Werner & Rossi, Alessandro, 2007. "How much has labour taxation contributed to European structural unemployment?," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1359-1375, April.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fer:dpaper:250. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Anita Niskanen (email available below). General contact details of provider: https://edirc.repec.org/data/vatttfi.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.