Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211897 
Authors: 
Year of Publication: 
2001
Series/Report no.: 
Bank of Finland Discussion Papers No. 19/2001
Publisher: 
Bank of Finland, Helsinki
Abstract: 
This paper uses a union bargaining framework, where the wage rate is negotiated between the representatives of employees and employers and firms unilaterally determine employment, to discuss the relationship between labour taxation and employment.In imperfectly competitive labour markets higher labour taxes income and payroll taxes will increase labour costs and have negative effects on employment.Tax progression tends to moderate wages and boost employment.Moreover, if labour tax bases are unequal due to tax exemptions, the structure of labour taxation matters so that the tax wedge may not be a sufficient statistic to describe the channel of influence of labour taxation.Finally, distortionary effects of labour taxes in more corporatist economies should be smaller than in economies with more decentralised wage bargaining. Empirical evidence though not always very strong supports these notions.
Subjects: 
union bargaining
labour taxation
tax progression
Persistent Identifier of the first edition: 
ISBN: 
951-686-739-1
Document Type: 
Working Paper

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