We model a two sector economy with unionized labor markets and competitive product markets, where workers and unions care about their relative wages, and show that the presence of a relative wage concern could help generation a positive relationship between tax progressivity and wage pressure.

The purpose of this paper is threefold. First, we survey the way in which the tax burden on labour has been proxied for in recent multi-country macro-economic studies. Second, we critically evaluate these proxies. Finally, we examine to what extent the conclusions of some studies change if some...