Tax Coordination and Unemployment

Clemens Fuest and Bernd Huber

No 97-26, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: This paper analyses the implications of unemloyment for fiscal competition and tax coordination among small open economies. Unemployment is modeled as resulting from wage bargaining. The analysis focuses on the effect of labour and capital tax co-ordination on welfare. We show that, while coordinated capital and labour tax increases unambiguously raise welfare if labour markets are competitive, different results emerge if labour markets are unionised. It turns out that co-ordinated capital and labour tax increases may reduce welfare.

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Related works:
Journal Article: Tax Coordination and Unemployment (1999)
Working Paper: Tax Coordination and Unemployment (1999)
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