Taxes and benefits in a non-linear wage equation

Graafland, J.J. and Huizinga, F.H. (1998): Taxes and benefits in a non-linear wage equation. Published in: De Economist , Vol. 147, No. 1 (1999): pp. 39-54.

Abstract

This paper develops a theoretical wage bargaining model, which yields a non-linear wage equation with a positive long term impact of taxes on wages as a special case. The elasticity of the replacement rate depends on the unemploy¬ment rate. The wage equation is estimated on time series data of the Netherlands. By distinguishing between short-term and long-term coefficients, we reconcile the divergence between theoretical predictions and empirical estimates of various components in the tax wedge. The last section summarizes the main findings and reviews some policy implications.

• Item Type: MPRA Paper
• Language: English
• Keywords: Wage equation; bargaining model; tax wedge; non-linearity
• Subjects: J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J38 - Public Policy; J - Labor and Demographic Economics > J3 - Wages, Compensation, and Labor Costs > J32 - Nonwage Labor Costs and Benefits ; Retirement Plans ; Private Pensions; J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining > J52 - Dispute Resolution: Strikes, Arbitration, and Mediation ; Collective Bargaining; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H39 - Other

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