Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 581: On the Provision of Public Goods in an Economy with Union Wage Setting and Distortionary Taxation

Thomas Aronsson (), Karl-Gustaf Löfgren () and Tomas Sjögren ()
Additional contact information
Thomas Aronsson: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Karl-Gustaf Löfgren: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden
Tomas Sjögren: Department of Economics, Umeå University, Postal: S 901 87 Umeå, Sweden

Abstract: This paper concerns public good provision under distortionary labor income taxation. The labor market is characterized by imperfect competition due to the influence of unions over wage formation. We show that a tradeoff between employment and hours of work per employee influences the welfare effect of an increase in the provision of the public good. This tradeoff means that the welfare gain of an increase in the hours of work, which is associated with the preexisting labor income tax, will be counteracted by a welfare cost in terms of lost employment. We also show how the welfare effect of an increase in the provision of the public good depends on whether the unions are able to directly affect the hours of work per employed union member, or if this influence only comes indirectly via the wage rate.

Keywords: Public goods; distortionary taxation; union wage setting.

JEL-codes: H41; J51; J60

16 pages, February 4, 2002

Full text files 

DownloadAsset.action...Id=3&assetKey=ues581 PDF-file

Download statistics

Questions (including download problems) about the papers in this series should be directed to David Skog ()
Report other problems with accessing this service to Sune Karlsson ().

RePEc:hhs:umnees:0581This page generated on 2024-09-13 22:17:25.