Tax Policy in Imperfect Labor Markets

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.