Labor Supply and the Demand for Child Care: An Intertemporal Approach

In this paper, we present a model of a one parent–one child household where parental decisions on labor supply, leisure, and the demand for private and public child care are simultaneously endogenized and intertemporally determined. We characterize the path of the optimal decisions and investigate the impact of various public child care fees and of the quality of public child care services on the parent’s time allocation and the child’s performance level. Our results show that different public child care policies may induce substantially diverging effects, and reveal that each policy frequently faces a trade off between an encouragement of labor supply and an enhancement of the child’s performance.child care fees and services, demand for child care, intertemporal optimization, labor supply, leisure, parental time allocation, private and public child care, public child care policy

Tax-Competition with Involuntary Unemployment

In the present paper we extend the classical tax-competition framework of Zodrow and Mieszkowski (1986) by modelling involuntary unemployment and by allowing for labour taxation as a second source of public funds. For a large class of production functions (including CES), it turns out that tax competition is characterized by underprovision of public goods, and by positive taxes on both labour and capital. We thus conclude that the results of Zodrow and Mieszkowski survive some important and substantial modifications of the framework, and are thus more general than recently suggested elsewhere.tax competition, capital and labour taxation, involuntary unemployment, efficient bargains

Labor Markets and Capital Tax Competition

Ogawa et al. (2006) analyze capital tax competition in a fixed-wage approach and show that the original results of Zodrow and Mieszkowski (1986) are not preserved in the presence of unemployment. In the present paper we challenge this view and investigate capital tax competition for some arbitrary institutional setting of the labor market. We find that if the labor market is characterized by some efficient bargaining solution, the results of Zodrow and Mieszkowski (1986) are preserved.capital tax competition, unemployment, efficient bargains

Labour Unions – To Unite or to Separate?

In this paper we investigate trade union formation. To this end we apply a model with two types of labour where the interests of both groups of labourers are represented by either a joint (industry) labour union or by two independent group-specific (professional) labour unions. We investigate whether, and if so, under which conditions, it is beneficial for at least one group of labourers to form its own independent union; or whether it is in the interest of both groups to have a joint industry labour union. Applying the (asymmetric) Nash bargaining solution, we find that under reasonable conditions, it is beneficial for at least one group of labourers to form its own independent labour union. In this case a joint union must be considered as an unstable institution. The profit share, however, is always higher if the firm bargains with a joint labour union. This explains why employers vehemently oppose recent split offs of specialized labour groups from existing industry unions and from tariff unions.trade-union formation, wage-employment bargains, Nash bargaining solution, industry and professional labour unions, trade union merger

Market Entry Regulation and International Competition

As a part of their industry or competition policies governments decide whether to allow for free market entry of firms or to regulate market access. We analyze a model where governments (ab)use these policy decisions for strategic reasons in an international setting. Multiple equilibria of this game emerge; and if the cost difference between domestic and foreign firms is ‘significant‘, all equilibria induce the same allocation, where production exclusively takes place in the cost-efficient country. Moreover, these equilibria are Pareto efficient if this cost difference is ‘substantial‘. Only if cost differences are ‘insignificant‘, may production take place in both countries in equilibrium.intergovernmental competition, competition policy, entry regulation, free market entry, international trade

Interjurisdictional tax competition, provision of two local public goods, and environmental policy

Upmann T. Interjurisdictional tax competition, provision of two local public goods, and environmental policy. Center for Mathematical Economics Working Papers. Vol 238. Bielefeld: Center for Mathematical Economics; 1995.This paper provides a model that integrates interjurisdictional tax competition and environmental policy. Each local government supplies two public goods - that benefit the local industry and the residents respectively - which are financed through distortionary taxation on industrial capital and pollutant emissions. In contrast to traditional theory of tax competition, we find that overprovision of local public goods may emerge in equilibrium. Since emission taxes serve to finance public spendings, the supply of public goods and the environmental quality are closely related. In the special case of a small region that cannot affect the national after-tax return to capital, we have the striking new result that in equilibrium two different regimes can occur. Either we have underprovision of public goods and an inefficiently high environmental quality, or we have overprovision of public goods and a too low environmental quality. These inefficiencies persevere as long as the federal government is not entitled to apply deliberate taxation/subsidy schemes. Correspondingly, unless regions are perfectly identical, we cannot hope to overcome the efficiency problem by symmetrical cooperative solutions

The Structure of Firm-Specific Labour Unions

In this paper we investigate trade union formation. To this end we apply a model with two types of labour where both groups decide on whether they prefer to be represented by either two independent craft-specific (professional) labour unions or by a joint (encompassing) labour union. Applying the asymmetric Nash bargaining solution, we find that it is beneficial for at least one group of labourers to resist a unification and to form instead its own independent labour union - and in some cases even both groups are worse off under the umbrella of a joint union. Consequently, a joint union must be considered as a rather unstable institution. As a mirror image, profits are lower if the firm bargains with two independent craft unions. This explains why employers vehemently oppose recent split offs of some occupational groups from existing unions and from stipulated tariff unions

Price Effects on Compound Commodities

We examine the effect of simultaneous price changes on the total demand for a group of goods, which we call a compound commodity. Specifically, we consider unit and proportional cost components (e.g., taxes, transportation costs) imposed on compound commodities. If the unit cost is positive, the proportional cost raises the relative price of the more expensive good and thus induces substitution towards the less expensive good within this group. Then, the substitution effect of the proportional cost for a compound commodity is non‐negative if and only if the compound commodity and the other goods are ‘on average’ not strongly substitutable

Price Effects on Compound Commodities

We examine the effect of simultaneous price changes on the total demand for a group of goods, which we call a compound commodity. Specifically, we consider unit and proportional cost components (e.g., taxes, transportation costs) imposed on compound commodities. If the unit cost is positive, the proportional cost raises the relative price of the more expensive good and thus induces substitution towards the less expensive good within this group. Then, the substitution effect of the proportional cost for a compound commodity is non‐negative if and only if the compound commodity and the other goods are ‘on average’ not strongly substitutable

On the Generalised Anti-inverse Elasticity Rule: An Existence Result

We consider an optimal commodity taxation problem under a consumption target and prove the existence of an optimal solution for the problem. This optimal solution obeys taxation rules that are contrary to standard taxation rules such as the inverse-elasticity rule. We also verify the necessary and sufficient condition for the optimal solution to exhibit uniform pricing