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Wage-setting and the tax system: theory and evidence for the UK

Lockwood, B and Manning, Alan ORCID: 0000-0002-7884-3580 (1993) Wage-setting and the tax system: theory and evidence for the UK. Journal of Public Economics, 52 (1). 1 - 29. ISSN 0047-2727

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Identification Number: 10.1016/0047-2727(93)90102-Y


This paper analyses the effects of a non-linear tax system on wage bargaining. The main conclusions are: an increase in the marginal income or payroll tax rate reduces the pre-tax wage; in the isoelastic case, an increase in the average tax rate increases the pre-tax wage by more than the tax increase, and a measure of the progressivity of the tax system (residual income progression) is a sufficient measure of the effect of the tax system on wage pressure. Empirical evidence is presented to support these propositions, and the predictions of the model regarding the effect of recent changes to the U.K. tax system on the distribution of earnings discussed.

Item Type: Article
Official URL:
Additional Information: © 1993 Elsevier Science Publishers B.V.
Divisions: Centre for Economic Performance
Subjects: H Social Sciences > H Social Sciences (General)
H Social Sciences > HB Economic Theory
Date Deposited: 25 Jun 2008 08:49
Last Modified: 15 Sep 2023 12:13

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