The labor market differs substantially from the benchmark of perfect competition. The aim of this thesis is to understand the implications of labor market imperfections for tax policy and social welfare.
Chapter 2 deals with labor unions, which play an important role in determining labor market outcomes in continental Europe and the Nordic countries.
Chapter 3 recognizes that the labor market is subject to frictions: finding a job or getting a vacancy filled is a costly process which takes time and effort.
Chapter 4 studies market power of firms, which pushes wages below productivity and reduces the labor share of income.
It is shown that when labor markets are imperfectly competitive, tax policy can be used to improve both equity and efficiency. Moreover, departures from perfect competition do not necessarily reduce welfare if distributional concerns play a role.

Additional Metadata
Keywords optimal taxation, unions, wage bargaining, directed search, unemployment, monopsony, tax incidence
Promotor B. Jacobs (Bas) , A.A.F. Gerritsen (Aart)
Publisher Erasmus University Rotterdam
ISBN 978-90-361-0614-6
Persistent URL
Series Tinbergen Institute research bulletin
Organisation Erasmus School of Economics
Hummel, A.J. (2020, September 17). Tax Policy in Imperfect Labor Markets (No. 765). Tinbergen Institute research bulletin. Erasmus University Rotterdam. Retrieved from