Quotation Rocha-Akis, Silvia. 2012. The Pain and Gain of Offshoring: The Effects of Tax Progression in a Segmented Labour Market. CESifo Working Paper Series No. 3739.


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Abstract

Over the previous two decades, many OECD countries have lowered the degree of progressivity in their tax structures. In this paper, I investigate labour tax progression in a world characterised by a segmented labour market where the higher-paying jobs are rationed due to (i) oligopolistic market structures, (ii) insider-oriented unions and (iii) international offshoring. In this second-best world, a revenue-neutral decrease in the progressivity of the tax schedule promotes higher domestic (net-of-tax) wage inequality where a shrinking fraction of workers provides the tax revenue to finance the redistribution to an increasing share of lower-wage workers. However, as the tax reform involves an increase in the offshoring intensity, which may translate into a cost advantage for the domestic average consumer, the overall welfare effect is ambiguous. It is shown that the negative effects dominate if trade unions are sufficiently insider-oriented.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Working/discussion paper, preprint
Language English
Title The Pain and Gain of Offshoring: The Effects of Tax Progression in a Segmented Labour Market. CESifo Working Paper Series No. 3739
Year 2012
URL http://www.cesifo-group.de/portal/page/portal/ifoHome/b-publ/b3publwp/_wp_abstract?p_file_id=17700530&category=

Associations

People
Rocha-Akis, Silvia (Former researcher)
Organization
Department of Economics (Kartal) (Details)
Research areas (Ă–STAT Classification 'Statistik Austria')
5300 Economics (Details)
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