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Tax Competition in Imperfect Labor Markets

Abstract : 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.
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Contributor : Elisabeth Lhuillier Connect in order to contact the contributor
Submitted on : Wednesday, February 22, 2017 - 5:25:25 PM
Last modification on : Tuesday, August 2, 2022 - 2:03:37 PM




Mathias Hungerbühler, Tanguy van Ypersele. Tax Competition in Imperfect Labor Markets. Annals of Economics and Statistics, CNGP-INSEE, 2014, - (113-114 Special issue on the Economics of Taxation), pp.99--120. ⟨10.15609/annaeconstat2009.113-114.99⟩. ⟨hal-01474438⟩