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The effects of labor unions on international capital tax competition

Nelly Exbrayat (), Carl Gaigne and Stephane Riou ()
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Nelly Exbrayat: GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - ENS Lyon - École normale supérieure - Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet [Saint-Étienne] - Université de Lyon - CNRS - Centre National de la Recherche Scientifique

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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.

Keywords: Tax competition; environmental economics (search for similar items in EconPapers)
Date: 2012
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00676418
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Published in Canadian Journal of Economics / Revue Canadienne d'Économique, Wiley, 2012, 45 (4), pp.1480-1503

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