The effects of labour unions on international capital tax competition

Nelly Exbrayat, Carl Gaigne and Stephane Riou ()

Canadian Journal of Economics/Revue canadienne d'économique, 2012, vol. 45, issue 4, 1480-1503

Abstract: 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. Nous analysons l’impact des rigidités salariales sur la concurrence fiscale entre deux pays imparfaitement intégrés. La formation de syndicats engendre une baisse du taux d’imposition des sociétés dans le pays où les rigidités salariales sont les plus fortes alors que l’imposition des sociétés peut augmenter dans l’autre pays. De plus, la libéralisation commerciale, en réduisant la différence de coûts salariaux entre pays, se traduit par une convergence des niveaux d’imposition et de bien‐être. Enfin, en présence de syndicats dans un seul des deux pays, ce dernier peut attirer la majorité des capitaux.

Date: 2012
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Citations: View citations in EconPapers (9)

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https://doi.org/10.1111/j.1540-5982.2012.01746.x

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Journal Article: The effects of labour unions on international capital tax competition (2012)
Working Paper: The effects of labour unions on international capital tax competition (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:canjec:v:45:y:2012:i:4:p:1480-1503

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