Progressive Taxation, Wage Bargaining, and Endogenous Working Time
Claus Thustrup Hansen
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Claus Thustrup Hansen: Institute of Economics, University of Copenhagen
Authors registered in the RePEc Author Service: Claus Thustrup Kreiner
No 96-14, Discussion Papers from University of Copenhagen. Department of Economics
This paper analyses the impact of tax reforms that decrease income tax progression in an equilibrium search model with wage bargaining and endogenous individual working time. The working time is either bargained together with the hourly wage (case 1) or determined solely by workers after bargaining over the wage (case 2). In both cases reducing tax progression increases working time of employed and, more interestingly, increases unambiguously wages and unemployment. Wages and unemployment rise more and working time and production less in case 1 compared to case 2; probably making case 2 countries best suited for such tax reforms.
Keywords: progressive taxes; wage bargaining; labour supply; search model (search for similar items in EconPapers)
JEL-codes: H24 J22 J41 (search for similar items in EconPapers)
Pages: 23 pages
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Persistent link: https://EconPapers.repec.org/RePEc:kud:kuiedp:9614
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