Tax competition and the political economy of public employment: a model for Austria

Michael Christl and Monika Köppl-Turyna

No 4, Working Papers from Agenda Austria

Abstract: In this work we simulate the effects of tax autonomy of the Austrian states on the levels of public employment in each state. We show that depending on the strength of the public sector lobby, tax autonomy would require reduction of employment in the public sector between 25% and 35% of the current level. We also show that tax autonomy increases welfare levels by 1% to 1.5%, that is that the positive change in the disposable income of the workers more than offsets the welfare loss resulting from lower public goods‘ provision. Finally, we show that reduction of public employment is welfare-superior to an alternative scenario, in which employment levels are held constant but the wage levels in the public sector need to be adjusted.

Keywords: Tax competition; Lobbying; Probabilistic voting; Austria (search for similar items in EconPapers)
JEL-codes: D72 H71 H77 (search for similar items in EconPapers)
Date: 2017
New Economics Papers: this item is included in nep-pbe and nep-pol
References: Add references at CitEc
Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/163561/1/agenda-austria-wp-04.pdf (application/pdf)

Related works:
Journal Article: Tax competition and the political economy of public employment: a model for Austria (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:agawps:04

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