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Tax Competition in Imperfect Labor Markets
Mathias Hungerbühler and Tanguy van Ypersele
Annals of Economics and Statistics
No. 113/114, SPECIAL ISSUE ON THE ECONOMICS OF TAXATION (June 2014), pp. 99-120
Stable URL: http://www.jstor.org/stable/10.15609/annaeconstat2009.113-114.99
Page Count: 22
You can always find the topics here!Topics: Taxes, Economic capital, Labor markets, Economic competition, Market competition, Capital investments, Tax rates, Human capital, Employee efficiency, Capital markets
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We introduce imperfect labor markets into the tax competition framework. Countries set tax rates on profit and income. Labor is immobile across countries, while capital is mobile. We show the importance of asymmetries in labor market institutions for the optimal tax policy. While most of the labor market variables play no role for the tax rates in autarchic countries, they become important when tax competition is introduced. Especially, we find that a country with “better” labor market institutions taxes capital at a higher rate and income at a lower rate compared to a country with “bad” labor markets. JEL: H87, J64. / KEY WORDS: Tax Competition, Unemployment, Search and Matching.
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