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Progressive Taxation and Wage Setting When Unions Strategically Interact

In a multisector economy with unionized labor markets, the interdependence of union wage claims-typical of industrial bargaining-affects the relationship between tax progressivity and wage pressure, which varies in a nonlinear fashion with the nature of the wage bargain, and can be hump-shaped.... Full description

1st Person: Brunello, Giorgio
Source: in Oxford economic papers Vol. 59, No. 1 (2007), p. 127-140
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Type of Publication: Article
Language: English
Published: 2007
Keywords: research-article
H24
Online: Volltext
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520 |a In a multisector economy with unionized labor markets, the interdependence of union wage claims-typical of industrial bargaining-affects the relationship between tax progressivity and wage pressure, which varies in a nonlinear fashion with the nature of the wage bargain, and can be hump-shaped. Our empirical analysis of 20 OECD countries for the period 1997-2004 shows that higher tax progressivity increases pre-tax wages (and unemployment) in countries characterized by industry level wage bargaining, and reduces them in countries with local or fully centralized bargaining. 
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