Wage rigidity and tax structure

We show that wage rigidity is high if a wage cut involves no change in the taxes rate or if replacement ratios are high. These factors can help to explain the finding that wage rigidity is less intense among high-income earners than among low-income earners.

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Bibliographic Details
Published in:Economics letters 2005-03, Vol.86 (3), p.297-301
Main Author: Lundborg, Per
Format: Article
Language:English
Subjects:
Economics
Risk aversion
Taxation
Taxes
Wage rigidity
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Description
Summary:We show that wage rigidity is high if a wage cut involves no change in the taxes rate or if replacement ratios are high. These factors can help to explain the finding that wage rigidity is less intense among high-income earners than among low-income earners.
ISSN:0165-1765
1873-7374
DOI:10.1016/j.econlet.2004.08.002