2023-09-28 14:46:10 +00:00
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abstract: 'This paper extends the Diamond (1980) model with labor unions to study
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optimal income taxation and to analyze whether unions can be desirable
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for income redistribution if income taxes are optimized. Unions bargain
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with firms over wages in each sector and firms unilaterally determine
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employment. Optimal unemployment benefits and optimal income taxes are
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lower in unionized labor markets. Unions raise the efficiency costs of
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income redistribution, because unemployment benefits and income taxes
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raise wage demands, and thereby generate involuntary unemployment. We
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show that unions are socially desirable only if they represent
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(low-income) workers whose participation is subsidized on a net basis.
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By creating implicit taxes on work, unions alleviate the labor-market
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distortions caused by income tax-ation. We empirically verify whether
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(i) participation tax rates are lower if unions are more powerful, and
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(ii) unions are desirable by compiling our own data set with union
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densities and participation tax rates for 18 sectors in 23 advanced
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countries. In line with our theoretical predictions, we find that
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participation tax rates are lower if unions are stronger. Moreover, the
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desirability condition for unions is never met empirically. Numerical
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simulations for the Netherlands confirm that unions are not desirable if
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income taxes are optimized and optimal participation taxes are lower if
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unions are stronger.(c) 2022 The Author(s). Published by Elsevier B.V.
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This is an open access article under the CC BY license
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(http://creativecommons.org/licenses/by/4.0/).'
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affiliation: 'Jacobs, B (Corresponding Author), Vrije Univ Amsterdam, Sch Business
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\& Econ, De Boelelaan 1105, NL-1081 HV Amsterdam, Netherlands.
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Hummel, Albert Jan, Univ Amsterdam, Tinbergen Inst, Amsterdam, Netherlands.
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Hummel, Albert Jan; Jacobs, Bas, CESifo, Munich, Germany.
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Jacobs, Bas, Vrije Univ Amsterdam, Tinbergen Inst, Amsterdam, Netherlands.
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Jacobs, Bas, Vrije Univ Amsterdam, Sch Business \& Econ, De Boelelaan 1105, NL-1081
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HV Amsterdam, Netherlands.'
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article-number: '104801'
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author: Hummel, Albert Jan and Jacobs, Bas
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author-email: 'a.j.hummel@uva.nl
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b.jacobs@vu.nl'
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author_list:
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- family: Hummel
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given: Albert Jan
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- family: Jacobs
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given: Bas
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da: '2023-09-28'
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doi: 10.1016/j.jpubeco.2022.104801
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earlyaccessdate: FEB 2023
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files: []
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issn: 0047-2727
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journal: JOURNAL OF PUBLIC ECONOMICS
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keywords: Optimal taxation; Unions; Wage bargaining; Labor participation
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keywords-plus: 'WAGE INEQUALITY; TAX PROGRESSION; PUBLIC PRODUCTION; EFFICIENCY;
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EMPLOYMENT; UNEMPLOYMENT; INSTITUTIONS; RESPONSES; POLICY; MODEL'
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language: English
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month: APR
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number-of-cited-references: '88'
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papis_id: fa35313a3e1bae366886fb900c8ae62c
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ref: Hummel2023optimalincome
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times-cited: '0'
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title: Optimal income taxation in unionized labor markets q
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2023-10-01 08:15:07 +00:00
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type: article
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2023-09-28 14:46:10 +00:00
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unique-id: WOS:000948164600001
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usage-count-last-180-days: '3'
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usage-count-since-2013: '3'
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volume: '220'
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web-of-science-categories: Economics
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year: '2023'
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