The effects of labour unions on international capital tax competition

Nelly Exbrayat, Carl Gaigne and Stephane Riou ()

Canadian Journal of Economics, 2012, vol. 45, issue 4, 1480-1503

Abstract: We analyze the impact of labour market rigidities on tax competition between two imperfectly integrated countries. Following a shift from a competitive to a unionized labour market in both countries, the capital tax can be adjusted upward in the country with the less rigid labour market, whereas the capital tax is always adjusted downward in the other country. Moreover, by reducing the labour cost differential between countries, trade liberalization gives rise to tax and welfare convergences. Finally, when a country adopts a flexible labour market, the unionized country may attract the majority of capital.

JEL-codes: F12 F16 H25 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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