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Taxes, social insurance contributions, and undeclared labour in unionized oligopoly

Minas Vlassis (), Stefanos Mamakis () and Maria Varvataki

Economics Letters, 2019, vol. 183, issue C, -

Abstract: This paper studies the phenomenon of undeclared labour. In a unionized duopoly with decentralized wage setting and proportional taxation we show that a trade-off exists for employers between contributing to social insurance for their employees and incurring taxes on labour. The configuration among the tax and social insurance contribution rates may thus generate undeclared labour in equilibrium. Nonetheless, those rates can be handled by a social planner so as to tackle undeclared labour at no cost to social welfare, but with welfare distributive consequences.

Keywords: Undeclared labour; Unionized cournot duopoly; Labour unions (search for similar items in EconPapers)
JEL-codes: J50 J51 L13 E26 (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1016/j.econlet.2019.108585

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