Optimal capital taxation, labour unions, and the hold-up problem

Palokangas T (2014). Optimal capital taxation, labour unions, and the hold-up problem. Labour 28 (4): 359-375. DOI:10.1111/labr.12041.

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Abstract

This document examines optimal capital taxation with wage-setting labour unions when the government taxes consumption, labour, and capital. The results are as follows. If unions can commit themselves to particular wages for a long period, then there is no hold-up problem. Otherwise, the hold-up problem creates a positive link from capital accumulation to the wage. The optimal labour subsidy is positive and greater in the presence than in the absence of the hold-up problem. The optimal capital subsidy is zero in the absence, but positive in the presence of the hold-up problem.

Item Type: Article
Research Programs: Advanced Systems Analysis (ASA)
Bibliographic Reference: Labour; 28(4):359-375 (December 2014) (Published online 19 October 2014)
Depositing User: IIASA Import
Date Deposited: 15 Jan 2016 08:50
Last Modified: 14 Sep 2016 08:30
URI: http://pure.iiasa.ac.at/10816

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