Public Provision of Private Goods and Equilibrium Unemployment

Thomas Aronsson (), Mikael Markström () and Tomas Sjögren ()
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Thomas Aronsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Mikael Markström: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

No 628, Umeå Economic Studies from Umeå University, Department of Economics

Abstract: This paper concerns public provision of a private good in a two-type model with optimal nonlinear income taxation. We assume that the wage rates are determined by bargaining between unions and firms, meaning that the equilibrium is characterized by unemployment. We show that, if the labor market is imperfectly competitive, additional mechanisms arise via the self-selection constraint, which may justify either more or less public provision of the private good than under perfect competition. Furthermore, public provision of private goods becomes a tool to influence the employment.

Keywords: Public provision of private goods; nonlinear taxation; unemployment (search for similar items in EconPapers)
JEL-codes: H21 H23 J51 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pbe
Date: 2004-02-27

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Persistent link: http://EconPapers.repec.org/RePEc:hhs:umnees:0628

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