Working Paper
Labor Tax Progressivity, Wage Determination, and the Relative Wage Effect
Giorgio Brunello, Daniela Sonedda
CESifo, Munich, 2002
CESifo Working Paper No. 721
CESifo, Munich, 2002
CESifo Working Paper No. 721
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.
Keywords: progressive taxation, relative wage effect