Tomas Sjögren

Income Taxation, Commodity Taxation and Provision of Public Goods under Labor Market Distortions

Income Taxation, Commodity Taxation and Provision of Public Goods under Labor Market Distortions

Union Wage Setting and Capital Income Taxation in Dynamic General Equilibrium

Abstract This paper concerns the effects of capital income taxation in a dynamic general equilibrium framework with union wage setting, when households face taxes related to both labor and capital. One purpose is to characterize the general equilibrium solution. Another is to study the effects of increased capital income taxation - in terms of the responses in real wages, employment, capital stock, output and consumption - and relate these behavioral responses to the overall tax structure. We also derive a cost-benefit rule for the purpose of analyzing the welfare effects of a small shift from labor income taxation to capital income taxation.

International Environmental Policy Reforms, Tax Distortions, and the Labor Market

This paper concerns the welfare consequences of environmental policy cooperation in a two-country economy. We assume that the countries finance their public expenditures by using distortionary taxes, and that they differ with respect to competition in the labor market. The purpose is to characterize the welfare effect of a policy reform, where the countries agree to slightly increase their expenditures on abatement. We show how the welfare effect of the policy reform depends on changes in the environmental damage, employment, and work hours. We also relate the welfare effect to the strategic interaction among the countries in the prereform equilibrium.

An Optimal-Tax Approach to Alcohol Policy

This paper deals with optimal income and commodity taxation in an economy, where alcohol is an externality-generating consumption good. In our model, alcohol can be bought domestically, imported, or produced illegally. Border trade alone implies an incentive to set the domestic alcohol tax below the marginal social damage of alcohol, and to tax (subsidize) commodities that are complementary with (substitutable for) alcohol. The income tax will also be used as a corrective instrument. Furthermore, although the effects of adding illegal production are ambiguous in general, a realistic outcome is, nevertheless, that it reduces both the optimal alcohol tax and the marginal income tax rate.

Public Provision of Private Goods and Equilibrium Unemployment

This paper concerns public provision of a private good in a two-type model with optimal nonlinear income taxation. We assume that the wage rates are determined by bargaining between unions and firms, meaning that the equilibrium is characterized by unemployment. We show that, if the labor market is imperfectly competitive, additional mechanisms arise via the self-selection constraint, which may justify either more or less public provision of the private good than under perfect competition. Furthermore, public provision of private goods becomes a tool to influence the employment.

Quasi-hyperbolic discounting, paternalism and optimal mixed taxation☆

This paper develops a dynamic model with endogenous labor supply, savings and health capital, where the consumers differ in ability as well as suffer from a self-control problem generated by quasi-hyperbolic discounting. The purpose is to analyze how a paternalistic government, which implements a time-consistent mix of labor income taxation, capital income taxation and commodity taxation, ought to use this tax system for purposes of redistribution and correction when individual ability is private information. Among the results, we show how the (nonlinear) income taxes ought to be used as indirect instruments for influencing the commodity demand behavior at the individual level: the intuition is that linear commodity taxes are not flexible enough to achieve proper incentives for consumption of unhealthy goods.

Mixed Taxation and Transboundary Externalities A Model with Large Jurisdictions

This article concerns income taxation and commodity taxation in a multijurisdiction framework with transboundary environmental damage. The decision problem facing the government in each such jurisdiction is represented by a two-type model (with asymmetric information between the government and the private sector). We show how the possibility to influence the world market producer price adds mechanisms of relevance for redistribution and externality correction which, in turn, affect the domestic use of taxation. Finally, with the noncooperative Nash equilibrium as a reference case, we consider the welfare effects of policy coordination.

Optimal Taxation, Redistribution, and Environmental Externalities

This paper surveys research on optimal redistributive taxation in economies with environmental externalities. A major question is whether externality correction only motivates an adjustment of the tax policy rule for the externality-generating activity, or whether the marginal value of the externality directly enters the policy rules for other tax instruments as well. In a static benchmark model with an atmospheric consumption externality, where the government uses a mix of a nonlinear income tax and linear commodity taxes, we show that Sandmo’s (1975) additivity property applies. This means that externality correction leads to an additional term (measuring the marginal value of the externality) in the commodity tax formula for the externality generating good, while the policy rules for commodity taxation of clean goods and marginal income taxation take the same form as in the absence of any externality. We also extend this benchmark model to capture a number of scenarios (such as non-atmospheric externalities, border trade in the externality generating good, and competition between governments in a multi-country framework), where the additivity property no longer applies. We end by examining an intertemporal model of optimal taxation with a stock-externality, allowing us to integrate the study of optimal redistributive taxation with literature on environmental economics and policy based on dynamic models.

Optimal tax and expenditure policy in the presence of emigration: Are credit restrictions important?

This paper concerns optimal income taxation in the presence of emigration. The basic model is a two-period model where all agents are identical and live in the home country in the first period of life, but where some emigrate at the end of the first period. It is shown that with a binding credit restriction, the government will tax labor income in the first period at a higher rate than otherwise, whereas the labor income tax in the second period is unaffected by emigration. With heterogenous agents, the labor income tax in period two will be affected by emigration.

'Investment' in Union Membership: A Managerial Approach

This paper concerns wage formation in a unionized economy when union membership is endogenous and determined by employment. A union is run by a leadership which has as an objective to strengthen the unions position in the labour market. This is achieved by building up membership. Among the results, it is found that since membership is determined by employment, the inclusion of the leaderships preferences into a unions objective function produces lower real wages than a static version would predict. It is also shown that an increase in the unions rate of time preference increases the natural rate of unemployment, while an increase in the speed at which workers entersleave a union has an opposite effect. Copyright Fondazione Giacomo Brodolini and Blackwell Publishers Ltd 2002.