Progressive Taxation and Wage Setting: Some Evidence for Denmark |
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Authors: | Ben Lockwood,Torsten Slø k,& Torben Tranaes |
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Affiliation: | University of Warwick, UK,;International Monetary Fund, USA,;University of Copenhagen, Denmark |
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Abstract: | The proposition that a progressive tax system contributes to wage moderation is studied using Danish earnings data disaggregated by occupation, gender and earnings level. Our main conclusions are that income-tax progression affects wage setting, but whether it moderates or exaggerates wage pressure is income dependent. An increase in progressivity reduces the pre-tax earnings of middle-income workers (manual male workers and moderate income earners among both male and female non-manual workers). The reverse is found for high-income earners (non-manual male workers), in that an increase in progressivity tends to raise pre-tax earnings. Finally, there is no significant effect of tax progressivity on the wages of low-income earners. JEL classification : H 3; J 3; J 5; J 6 |
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Keywords: | Wage determination income-tax progression |
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