Optimal Factor Taxation under Wage Bargaining - A Dynamic Perspective

Arbeitspapier

We consider the issue of steady-state optimal factor taxation in a Ramsey-type dynamic general equilibrium setting with two distinct distortions: i) taxes on capital and labour are the only available tax instruments for raising revenues, and ii) labour markets are subject to a static inefficiency resulting from wage bargaining. If considered in isolation, under broad assumptions the two distortions create conflicting demands on the wage tax, while calling for a zero capital tax. By combining the two distortions, we arrive at the conclusion that both instruments should be used, implying that the zero-capital tax result in general is no longer valid under imperfectly competitive labour markets.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: CESifo Working Paper ; No. 836

Classification and Topics

• Classification: Wirtschaft
• Subject: optimal taxation ; imperfectly competitive labour markets ; capital accumulation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Koskela, Erkki ; von Thadden, Leopold
• Event: Veröffentlichung
• (who): Center for Economic Studies and ifo Institute (CESifo)
• (where): Munich
• (when): 2003

Further information

• Handle: http://hdl.handle.net/10419/76380
• Last update: 10.03.2025, 11:45 AM CET