Bargaining Frictions, Labor Income Taxation, and Economic Performance

Stéphane Auray and Samuel Danthine

Cahiers de recherche from Departement d'économique de l'École de gestion à l'Université de Sherbrooke

Abstract: This paper is an attempt to explain differences in economic performance between a subset of OECD countries. We classify countries in terms of their degree of rigidity in the labor market, and use a matching model with labor/leisure choice, bargaining frictions, and labor income taxation to capture these rigidity differences. Added flexibility improves economic performance in different ways depending on whether income taxation is high or low. Feeding income taxation rates estimated from the countries at hand, we find that the model is able to replicate the observed rigidity levels. The model is also shown to reproduce well cross-country differences in non-employment population ratios and the share of part-time jobs.

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)
Pages: 44 pages
Date: 2009-09-01
New Economics Papers: this item is included in nep-dge and nep-lab
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Downloads: (external link)
http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-0920.pdf First version, 2009 (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 (2008)
Working Paper: Bargaining Frictions, Labor Income Taxation and Economic Performance (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:shr:wpaper:09-20

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