Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining?

Erkki Koskela and Ronnie Schöb
Authors registered in the RePEc Author Service: Ronnie Schoeb

No 203, Discussion Papers from VATT Institute for Economic Research

Abstract: Using the Nash bargaining approach to wage negotiations this paper shows that conventional wisdom, according to which the total tax wedge is the sum of wage and payroll taxes, is valid for equal tax bases, e.g., when the tax exemption takes the form of a tax credit. However, the equivalence result ceases to hold when the tax bases are unequal due to tax allowances. In this case a revenue-neutral restructuring of labour taxes toward a narrower tax base decreases the gross wage and is thus good for employment.

Keywords: Tax wedge; payroll tax; wage tax; wage bargaining; non-equivalence; Labour market; Työmarkkinat; Taxation; Verotus; Effectiveness of public services; Julkisten palvelujen vaikuttavuus; H200 - Taxation; Subsidies; and Revenue: General; J510 - Trade Unions: Objectives; Structure; and Effects (search for similar items in EconPapers)
Date: 1999
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (39)

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https://www.doria.fi/handle/10024/148374

Related works:
Journal Article: Does the composition of wage and payroll taxes matter under Nash bargaining? (1999)
Working Paper: Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining (1998)
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