By focusing on the Italian experience, we ask whether the relationship between labor taxes and unemployment varies across regions. In spite of similar national labor market institutions, we show that this relationship is significantly stronger in the highly industrialized North than in the...

We study the empirical relationship between labor taxation and pretax wages in Italy. We find that higher tax progressivity increases pretax wages. To explain this result, we introduce in an informal way a relative wage effect and argue that the combination of this effect with the labor supply...

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.