Bargaining Frictions, Labor Income Taxation and Economic Performance

Stéphane Auray and Samuel Danthine

Cahiers de recherche from CIRPEE

Abstract: A matching model with labor/leisure choice and bargaining frictions is used to explain (i) differences in GDP per hour and GDP per capita, (ii) differences in employment and hours worked (per capita and per worker), (iii) differences in the proportion of part-time work across countries. The model predicts that the higher the level of rigidity in wages and hours the lower are GDP per capita, employment, part-time work and hours worked, but the higher is GDP per hour. In addition, it predicts that a country with a high level of rigidity in wages and hours and a high level of income taxation has higher GDP per hour and lower GDP per capita, employment and part-time work than a country with less rigidity and a lower level of taxation. This is due mostly to a lower level of employment. In contrast, a country with low levels of rigidity in hours and in wage setting but with a higher level of income taxtion has a lower GDP per capita and a higher GDP per hour than the economy with low rigidity and low taxation. In this configuration, the level of employment is similar in both economies but the share of part-time work is larger. The model accounts well qualitatively for the facts, and a plausible calibration accounts well qualitatively for the differences between the US, French and Dutch economies.

Keywords: Models of search and matching; bargaining frictions; economic performance; labor market institutions; part-time jobs; labor market rigidities (search for similar items in EconPapers)
JEL-codes: E24 J22 J30 J41 J50 J64 (search for similar items in EconPapers)
Date: 2008
New Economics Papers: this item is included in nep-dge, nep-lab and nep-mac
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.cirpee.org/fileadmin/documents/Cahiers_2008/CIRPEE08-03.pdf (application/pdf)

Related works:
Journal Article: Bargaining frictions, labor income taxation, and economic performance (2010)
Working Paper: Bargaining Frictions, Labor Income Taxation, and Economic Performance (2009)
Working Paper: Bargaining Frictions, Labor Income Taxation and Economic Performance (2008)
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:lvl:lacicr:0803

Access Statistics for this paper

More papers in Cahiers de recherche from CIRPEE Contact information at EDIRC.
Bibliographic data for series maintained by Manuel Paradis ().