Payroll Taxes vs. Wage Taxes: Non-Equivalence Results
Erkki Koskela and
Ronnie Schöb
Authors registered in the RePEc Author Service: Ronnie Schoeb
No 143, CESifo Working Paper Series from CESifo
Abstract:
According to conventional wisdom the total tax wedge, which is the sum of payroll and wage taxes is sufficient to specify the distortion of wage formation caused by labour taxation. This paper casts doubt on this view by providing two reasons why this irrelevance conjecture may not hold in non-competitive labour markets when factors of production are complements. It is shown that gross nominal wages will increase if a revenue-neutral restructuring of labour taxes towards higher wage taxes reduces the wage elasticity of labour demand. In addition, it turns out that, even with constant labour demand elasticity, gross nominal wages increase as a result of higher wage taxes if the trade union's bargaining power is not comprehensive.
Keywords: tax wedge; payroll tax; wage tax; wage bargaining (search for similar items in EconPapers)
Date: 1997
References: Add references at CitEc
Citations: View citations in EconPapers (1)
Downloads: (external link)
https://www.cesifo.org/DocDL/ces_wp143.pdf (application/pdf)
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_143
Access Statistics for this paper
More papers in CESifo Working Paper Series from CESifo Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().