Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Labour tax policies and strategic offshoring under unionised oligopoly
Abstract: In a model with a unionised immobile labour force we
analyse how labour taxes and transfers towards unemployed workers are
optimally chosen when a welfare maximising government faces oligopolistic
and partly mobile firms. We consider two polar types of government: one
whose objective consists of maximising the sum of domestic producer's and
consumers' surplus and one that aims at maximising employed and unemployed
workers' payoffs. We show that depending on the combination of foreign
labour costs, the degree of domestic union bargaining power, and the sunk
costs of relocation, the former type of government may choose to set taxes
so as to induce an outward relocation of production.
JEL-Codes: H30; J30; J50; L13; (follow links to similar papers)
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