Optimal factor taxation under wage bargaining: a dynamic perspective

Erkki Koskela and Leopold von Thadden

No 2002,31, Discussion Paper Series 1: Economic Studies from Deutsche Bundesbank

Abstract: We consider the issue of steady-state optimal factor taxation in a Ramsey-type dynamic general equilibrium setting with two distinct distortions: i) taxes on capital and labour are the only available tax instruments for raising revenues, and ii) labour markets are subject to a static inefficiency resulting from wage bargaining. If considered in isolation, under broad assumptions the two distortions create conflicting demands on the wage tax, while calling for a zero capital tax. By combining the two distortions, we arrive at the conclusion that both instruments should be used, implying that the zero-capital tax result in general is no longer valid under imperfectly competitive labour markets.

Keywords: Optimal taxation; Imperfectrly competitive labour markets; Capital accumulation (search for similar items in EconPapers)
JEL-codes: E62 H21 J51 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Optimal Factor Taxation under Wage Bargaining: A Dynamic Perspective (2008)
Journal Article: Optimal Factor Taxation under Wage Bargaining: A Dynamic Perspective (2008)
Working Paper: Optimal Factor Taxation under Wage Bargaining - A Dynamic Perspective (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bubdp1:4195

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