BARGAINING OVER TAXES AND ENTITLEMENTS IN THE ERA OF UNEQUAL GROWTH

Entitlements have become an increasing component of total government spending in the United States over the last six decades. Using a political-economy model where parties bargain over taxes and entitlements, we argue that such dynamics can be explained by two factors: “unequal growth,” where top earners became richer while the income of the bottom 50% stagnated, and budget rules that provide bargaining power to low-income earners through a “status quo effect.” In a model calibrated to the United States, we show that sustained bargaining power by a party representing the poor results in a rising share of entitlements consistent with the data.     

COLLECTIVE BARGAINING,AWARENESS OF GENERAL EQUILIBRIUM EFFECTS,AND UNEMPLOYMENT*

We explore the significance of general equilibrium feedback effects for wage‐bargaining. We examine a two‐sector economy and show that if agents only consider labor demand effects low real wages and low unemployment are the consequences. With an intermediate view, i.e., when partial equilibrium effects within a sector are taken into account, high real wages and unemployment result. If all general equilibrium effects are perceived simultaneously, we once again obtain a situation with low wages and unemployment. The results may explain why unemployment is high in some European countries.     

WHO WANTED COLLECTIVE BARGAINING IN THE FIRST PLACE?

This paper considers certain international differences in organizational and bargaining costs using an extended model of industrial relations sketched at the outset. In this model, the prevailing preferences of a nation's workers vis-a-vis radical alternatives to capitalism, collective bargaining, and nonunion industrial relations constitute a critical determinant of employer recognition of collective bargaining (or resistance thereto) and of the structure, scope and economic performance of collective bargaining. The analysis also suggests that various economic and political developments during the postwar era might have combined to devalue the social role of traditional collective bargaining and to generate renewed interest in alternative systems of determining labor income.     

EFFECTS OF TAXES AND BENEFITS ON INCOME DISTRIBUTION IN KOREA

This paper examines the redistributive effects of Korea's fiscal policies, including consumption taxes and in‐kind benefits. Using the Household Income and Expenditure Survey of 2007, we find that taxes and transfers reduce income inequality in Korea by 13.8 percent. Contrary to the popular belief that direct taxes are the key tool for redistribution, in‐kind benefits, direct taxes, and social security contributions all decrease the Gini coefficient by 6.7, 4.7, and 2.9 percentage points, respectively. The redistributive effect of consumption taxes is small and negative (?0.5 percentage point). Policy simulations indicate that education spending financed by the personal income tax has a positive redistributive effect and that the lower 70 percent of households enjoy positive net benefits. Spending targeting the poor has a strong redistributive effect, which implies low popularity because the majority of households face net losses.     

WAGE DISPARITY,TEAM PERFORMANCE,AND THE 2005 NHL COLLECTIVE BARGAINING AGREEMENT

This paper provides an empirical analysis of salary disparity and team performance in the National Hockey League during the first decade of the twenty‐first century. We find that the 2005 Collective Bargaining Agreement (CBA) reduced average salaries immediately after it was introduced but did not change the trajectory of average salaries nor did it alter the salary disparity on the average team. Salary disparity harms overall team performance primarily through reduced defensive performance and this relationship was not altered by the 2005 CBA. (JEL J31, J42, L83)     

ON THE TREATMENT OF TAXES AND GOVERNMENT IN THE NATIONAL ACCOUNTS

Framed in the context of the ongoing revision of the 1993 System of National Accounts (SNA), this note proposes a new presentation of the National Accounts. While it does not require new information, nor difficult calculations, it is suggested to be conceptually clearer and practically simpler. The changes concern the treatment of taxes and government in the national accounts which imply that: (i) GDP, measured at basic price, is now exactly the sum of all value added, which is split in the compensation of employees and an enlarged operating surplus; (ii) the two functions of government are clearly distinguished in a modified sequence of accounts, that is, as producing non-market services up to the allocation of primary income account, and then as redistributing the national income; and (iii) with a conventional allocation of government services and GDP broken down between market GDP and non-market GDP, households remain the only final consumer and the so called question of consumption subsidies is resolved.     

TAXES AND GROWTH: TESTING THE NEOCLASSICAL AND ENDOGENOUS GROWTH MODELS

Changes in the tax rate alter real growth permanently in an endogenous growth model, but only temporarily in a neoclassical model, where the only permanent effect is a decrease in the steady-state level of output per capita. Using data from the 1960'1992 period for a panel of 11 Organization of Economic Cooperation and Development economies, this paper's empirical results support the following conclusions. First, consistent with the tax smoothing hypothesis, tax rates have exhibited significant persistent changes while output growth rates have not. Second, a higher tax rate permanently reduces the level of output but has no permanent effects on the output growth rate. These findings are inconsistent with endogenous growth mechanisms and suggest that the relationship between output and the tax rate is best described by the neoclassical growth model. (JEL E62, 041)     

TAXES AND ENTREPRENEURSHIP IN OECD COUNTRIES

I examine how taxes and tax progressivity affect two different types of entrepreneurship—established business ownership and nascent entrepreneurship—in a large group of Organization for Economic Co‐operation and Development countries, using 2000–2009 macro‐level Global Entrepreneurship Monitor data. Empirical evidence from Arellano‐Bond generalized method of moments estimation suggests that higher tax progressivity exerts a negative influence on nascent enterprises but appears to have no impact on established business ownership. Changes in marginal and average tax rates are found to have no significant influence on either type of entrepreneurship. The most important contribution of the article is the comparison of tax impacts on actual and nascent entrepreneurship rates. (JEL H24, H29, M13, M19)     

SUBSIDIZATION AND BARGAINING IN MIXED OLIGOPOLIES

In this paper, we consider political interaction in a mixed oligopoly by characterizing how a subsidy is endogenously determined through the bargaining process between firms and politicians. We discuss how the nature of the political equilibrium changes with the type of competition, the specification of the cost function, and the timing of the game. We show that when bargaining between firms and politicians takes place, the resulting social welfare may be even worse than that under a public firm monopoly.     

A NOTE ON PRODUCT DIFFERENTIATION IN A LINEAR CITY AND WAGE BARGAINING

Economides (Economics Letters, 1986, 21, pp. 67–71) has shown that within a linear city an equilibrium exists in a two‐stage location–price game when the curvature of the transportation cost function is sufficiently high. One important point is that not all of these equilibria are at maximal differentiation. In this paper, we include an additional stage with decentralized wage bargaining. This intensifies price competition resulting in locations that are nearer to the extremes of the city. The magnitude of this effect depends on the bargaining power of the unions. Contrary to the model with exogenously given costs, if unions are sufficient strong all price equilibria in pure strategies are at maximal differentiation. With a low parameter for the curvature of the transportation cost function unions can improve the location decision from a social viewpoint.