Scandinavian Working Papers in Economics

Umeå Economic Studies,
Umeå University, Department of Economics

No 601: Efficient Taxation, Wage Bargaining and Policy Coordination

Thomas Aronsson () and Tomas Sjögren ()
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Thomas Aronsson: 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 optimal nonlinear taxation under right-to-manage wage formation, and we assume that the fall-back profit facing firms during wage bargaining depends on the profit they can obtain if moving production abroad. The purpose is to study how policy coordination among countries can be used to increase the welfare level in comparison with an uncoordinated equilibrium. We consider coordinated policy reforms with respect to the marginal taxation of labor income, the unemployment benefit and the provision of a public good.

Keywords: Optimal taxation; policy coordination; union wage setting

JEL-codes: H21; J22; J51

27 pages, December 26, 2002

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