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Autre publication scientifique Année : 2010

How labor market rigidities shape business taxation in a global economy?

Résumé

We investigate the impact of trade liberalization upon the taxation of capital within a context of labor market rigidities. Using a model of trade and location, we show that labor market imperfections not only strengthen tax competition but also affect the relationship between trade integration and tax policies. Capital taxation follows a J-shaped relationship with trade costs when labor markets are flexible, whereas it may increase with falling trade costs in the presence of trade unions acting as Stackelberg leaders or playing simultaneously with governments. In addition, we analyze the outcome which arises from di§erences between the various countries' labor market institutions. Trade liberalization reduces the international differences in wage and capital taxation, making the unionized country more attractive.
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Dates et versions

halshs-00537021, version 1 (18-11-2010)

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  • HAL Id : halshs-00537021 , version 1

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Nelly Exbrayat, Carl Gaigné, Stéphane Riou. How labor market rigidities shape business taxation in a global economy?. 2010. ⟨halshs-00537021⟩
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Dernière date de mise à jour le 28/04/2024
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