Progressive Taxation and Wage Setting: Some Evidence for Denmark

Ben Lockwood, Torsten Sløk and Torben Tranaes ()

Scandinavian Journal of Economics, 2000, vol. 102, issue 4, 707-723

Abstract: The proposition that a progressive tax system contributes to wage moderation is studied using Danish earnings data disaggregated by occupation, gender and earnings level. Our main conclusions are that income‐tax progression affects wage setting, but whether it moderates or exaggerates wage pressure is income dependent. An increase in progressivity reduces the pre‐tax earnings of middle‐income workers (manual male workers and moderate income earners among both male and female non‐manual workers). The reverse is found for high‐income earners (non‐manual male workers), in that an increase in progressivity tends to raise pre‐tax earnings. Finally, there is no significant effect of tax progressivity on the wages of low‐income earners. JEL classification: H3; J3; J5; J6

Date: 2000
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