AN OPEN SHOP, WAGE BARGAINING, AND TAXATION--A NOTE

Abstract

In a social custom model of union membership with wage bargaining, higher levels of company taxes lower wages while having uncertain employment effects. A higher marginal income tax rate increases employment. Changes solely in the level of income taxation, retaining marginal rates, have ambiguous wage and employment consequences. Endogenizing union membership, therefore, does not alter the effects of tax changes in comparison to a right-to-manage model with exogenously fixed level of density. Copyright 1997 by Royal Economic Society.