Effort, Taxation and Unemployment

Univ. of Aarhus Dept. of Economics WP 1997-11

15 Pages Posted: 7 Oct 1997

See all articles by Torben M. Andersen

Torben M. Andersen

University of Aarhus - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR); IZA Institute of Labor Economics

Bo Sandemann Rasmussen

Aarhus University - Department of Economics and Business Economics

Date Written: June 17, 1997

Abstract

The importance of the design of the income tax system for the incentive to supply effort is considered for both a situation where firms (efficiency wage model) or unions (monopoly union model) have the power to determine wages. A tax reform raising marginal taxes at all income levels and increasing (decreasing) average taxes at high (low) income levels may lead to higher wages, lower employment and higher unemployment under either wage determination regime.

JEL Classification: J41, J51, H22

Suggested Citation

Andersen, Torben M. and Rasmussen, Bo Sandemann, Effort, Taxation and Unemployment (June 17, 1997). Univ. of Aarhus Dept. of Economics WP 1997-11, Available at SSRN: https://ssrn.com/abstract=34784 or http://dx.doi.org/10.2139/ssrn.34784

Torben M. Andersen (Contact Author)

University of Aarhus - Department of Economics ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Centre for Economic Policy Research (CEPR)

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United Kingdom

IZA Institute of Labor Economics

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Bonn, D-53072
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Bo Sandemann Rasmussen

Aarhus University - Department of Economics and Business Economics ( email )

Fuglesangs Allé 4
Aarhus V
Denmark
+45 8942 1133 (Phone)
+45 8613 6334 (Fax)

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