Severance pay often results from a bargain between the firm and the employee to avoid or terminate a legal conflict. We theoretically investigate how income taxation affects these negotiations. Using panel data from West Germany and exploiting a change in tax law in 1999, we find that a higher...

In Germany, there is no trade union membership wage premium and a membership fee of 1% of the gross wage. Therefore, prima facie, there are strong incentives to free-ride on the benefits of trade unionism. We establish empirical evidence for a private gain from trade union membership which has...

Status considerations with respect to consumption give rise to negative externalities because individuals do not take into account that their decisions affect the relative consumption position of others. Further, status concerns create incentives for excessive labour supply in competitive...