Tax Coordination and Unemployment.
This paper analyses the implications of unemloyment for fiscal competition and tax coordination among small open economies. Unemployment is modeled as resulting from wage bargaining. The analysis focuses on the effect of labour and capital tax co-ordination on welfare. We show that, while coordinated capital and labour tax increases unambiguously raise welfare if labour markets are competitive, different results emerge if labour markets are unionised. It turns out that co-ordinated capital and labour tax increases may reduce welfare.
Authors: | Fuest, Clemens ; Huber, Bernd |
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Institutions: | Economic Policy Research Unit (EPRU), Økonomisk Institut |
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