Charity and redistributive taxation in a unionized economy

No 2006/21, Discussion Papers from Free University Berlin, School of Business & Economics

Abstract: European economies are characterized by unionized labor markets and a pronounced governmental redistribution of income. This paper studies a model where those two features are combined with the possibility for individuals to make charitable contributions to the poor. The model exhibits equilibrium unemployment that increases with the degree of altruism. It is shown that a more progressive income tax can both reduce the unemployment rate and improve the public budget. These results are driven by charity increasing wage pressure and the altruistic rich failing to internalize the effect of their donations on the wage setting behavior of the unions.

Keywords: Equilibrium Unemployment; Income Tax; Charity; Trade Unions (search for similar items in EconPapers)
JEL-codes: H24 J50 (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Charity and redistributive taxation in a unionized economy (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:fubsbe:200621

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