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Progressive Taxation and Wage Setting: Some Evidence for Denmark
Author(s) -
Lockwood Ben,
Sløk Torsten,
Tranaes Torben
Publication year - 2000
Publication title -
scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/1467-9442.00222
Subject(s) - earnings , economics , labour economics , wage , moderation , income tax , progressive tax , demographic economics , state income tax , gross income , tax reform , public economics , psychology , social psychology , accounting
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