IDEAS home Printed from https://ideas.repec.org/p/yor/yorken/99-21.html
   My bibliography  Save this paper

Can Tax Progression Raise Employment? A Study of Four European Countries

Author

Listed:
  • John P. Hutton
  • Anna Ruocco

Abstract

This paper shows that increases in direct tax progression tend to reduce wages and increase welfare and employment, even in a model allowing for labour supply effects. The employment effect is reversed when benefit levels are low, however. The model shows the different impacts on full and parttime workers, and on men and women. The countries modelled are France, Germany, Italy and the UK. An efficiency wage sector with training costs generates unemployment effects. Households choose between an efficiency wage sector and a market-clearing sector.

Suggested Citation

  • John P. Hutton & Anna Ruocco, "undated". "Can Tax Progression Raise Employment? A Study of Four European Countries," Discussion Papers 99/21, Department of Economics, University of York.
    • Handle: RePEc:yor:yorken:99/21
    as

    Download full text from publisher

    File URL: https://www.york.ac.uk/media/economics/documents/discussionpapers/1999/9921.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
    2. Peter Birch Sørensen, "undated". "Optimal Tax Progressivity in Imperfect Labour Markets," EPRU Working Paper Series 97-10, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    3. Peter Birch Sørensen, 1997. "Optimal Tax Progressivity in Imperfect Labour Markets," Discussion Papers 97-06, University of Copenhagen. Department of Economics.
    4. Ruocco, Anna, 1996. "A multi-country general equilibrium model for the European Union: The basic features and the coding structure," Tübinger Diskussionsbeiträge 83, University of Tübingen, School of Business and Economics.
    5. Michael Hoel, 1990. "Efficiency wages and income taxes," Journal of Economics, Springer, vol. 51(1), pages 89-99, February.
    6. Ben Lockwood & Alan Manning, 1993. "Wage Setting and the Tax System: theory and Evidence for the UK," CEP Discussion Papers dp0115, Centre for Economic Performance, LSE.
    7. 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.
    8. repec:bla:scandj:v:92:y:1990:i:2:p:215-35 is not listed on IDEAS
    9. Graafland, Johan J. & de Mooij, Ruud A., 1999. "Fiscal policy and the labour market: An AGE analysis," Economic Modelling, Elsevier, vol. 16(2), pages 189-219, April.
    10. Campbell, Carl & Orszag, J. Michael, 1998. "A model of the wage curve," Economics Letters, Elsevier, vol. 59(1), pages 119-125, April.
    11. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-444, June.
    12. 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.
    13. Laszlo Goerke, 1999. "Efficiency Wages and Taxes," Australian Economic Papers, Wiley Blackwell, vol. 38(2), pages 131-142, June.
    14. repec:bla:ausecp:v:38:y:1999:i:2:p:131-42 is not listed on IDEAS
    15. John Hutton & Anna Ruocco, 1999. "Tax Reform and Employment in Europe," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 263-287, August.
    Full references (including those not matched with items on IDEAS)

    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. John Hutton & Anna Ruocco, 1999. "Tax Reform and Employment in Europe," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 6(3), pages 263-287, August.
    2. Fuest, Clemens & Huber, Bernd, 2000. "Is tax progression really good for employment? A model with endogenous hours of work," Labour Economics, Elsevier, vol. 7(1), pages 79-93, January.
    3. Salvador Barrios & Jonathan Pycroft & Bert Saveyn, 2013. "The marginal cost of public funds in the EU: the case of labour versus green taxes," Taxation Papers 35, Directorate General Taxation and Customs Union, European Commission.
    4. Lans Bovenberg, 2003. "Tax Policy and Labor Market Performance," CESifo Working Paper Series 1035, CESifo.
    5. John P. Hutton & Anna Ruocco, "undated". "Tax Progression and the Wage curve," Discussion Papers 98/10, Department of Economics, University of York.
    6. Knut Røed & Steinar Strøm, 2002. "Progressive Taxes and the Labour Market: Is the Trade–off Between Equality and Efficiency Inevitable?," Journal of Economic Surveys, Wiley Blackwell, vol. 16(1), pages 77-110, February.
    7. Hutton, John P. & Ruocco, Anna, 1998. "Tax reform and employment in Europe," Tübinger Diskussionsbeiträge 144, University of Tübingen, School of Business and Economics.
    8. Bohringer, Christoph & Boeters, Stefan & Feil, Michael, 2005. "Taxation and unemployment: an applied general equilibrium approach," Economic Modelling, Elsevier, vol. 22(1), pages 81-108, January.
    9. Boeters, Stefan & Böhringer, Christoph & Feil, Michael, 2002. "Taxation and unemployment: an applied general equilibrium approach for Germany," ZEW Discussion Papers 02-39, ZEW - Leibniz Centre for European Economic Research.
    10. Hansen, Claus Thustrup & Pedersen, Lars Haagen & Slok, Torsten, 2000. "Ambiguous effects of tax progressivity -- theory and Danish evidence," Labour Economics, Elsevier, vol. 7(3), pages 335-347, May.
    11. Hynninen, Sanna-Mari, 2009. "Is there a wage curve for the highly educated?," ISER Working Paper Series 2009-17, Institute for Social and Economic Research.
    12. Marcel Gérard, 2002. "Tax Competition, the Distribution of MNE's Ownership and the Wage Formation Process," CESifo Working Paper Series 631, CESifo.
    13. Kory Kroft & Kavan Kucko & Etienne Lehmann & Johannes Schmieder, 2020. "Optimal Income Taxation with Unemployment and Wage Responses: A Sufficient Statistics Approach," American Economic Journal: Economic Policy, American Economic Association, vol. 12(1), pages 254-292, February.
    14. Baltagi, Badi H. & Rokicki, Bartlomiej, 2014. "The spatial Polish wage curve with gender effects: Evidence from the Polish Labor Survey," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 36-47.
    15. Forslund, Anders & Gottfries, Nils & Westermark, Andreas, 2005. "Real and nominal wage adjustment in open economies," Working Paper Series 2005:23, IFAU - Institute for Evaluation of Labour Market and Education Policy.
    16. Frederick Van der Ploeg, 2003. "Do Social Policies Harm Employment and Growth?," CESifo Working Paper Series 886, CESifo.
    17. Sijbren Cnossen, 2002. "Tax Policy in the European Union: A Review of Issues and Options," CESifo Working Paper Series 758, CESifo.
    18. Ilias Livanos, 2010. "The Wage-Local Unemployment Relationship in a Highly Regulated Labour Market: Greece," Regional Studies, Taylor & Francis Journals, vol. 44(4), pages 389-400.
    19. Zierahn, Ulrich, 2012. "Monocentric cities, endogenous agglomeration, and unemployment disparities," HWWI Research Papers 130, Hamburg Institute of International Economics (HWWI).
    20. Erkki Koskela & Ronnie Schöb, 2012. "Tax Progression under Collective Wage Bargaining and Individual Effort Determination," Industrial Relations: A Journal of Economy and Society, Wiley Blackwell, vol. 51(3), pages 749-771, July.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:yor:yorken:99/21. 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: Paul Hodgson (email available below). General contact details of provider: https://edirc.repec.org/data/deyoruk.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.