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This paper uses a union bargaining framework, where the wage rate is negotiatedbetween the representatives of employees and employers and firms unilaterallydetermine employment, to discuss the relationship between labour taxation andemployment. In imperfectly competitive labour markets higher labour taxes --income and payroll taxes -- will increase labour costs and have negative effects onemployment. Tax progression tends to moderate wages and boost employment.Moreover, if labour tax...

Labour Taxation and Employment in Trade Union Models: A Partial Survey