Tax Progressivity and the Trade Union's Fallback-Option

No 02-15, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: When we analyse the labour market consequences of labour tax reforms in a model of firm-union wage bargaining, minor changes in the formulation of the union`s fallback option can have drastic effects. This paper compares two variants of the model in which either workers have no reemployment opportunity or the probality of employment in another sector is determined by the overall unemployment rate. It is argued both on analytical and numerical grounds that the second alternative is the only plausible one. This conclusion is confirmed by an explicit integration of workers´inter-sectoral mobility into the model.

Keywords: labour taxation; tax progression; tax reform; trade unions; unemployment; labour mobility (search for similar items in EconPapers)
JEL-codes: H20 J51 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:882

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