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Tax competition and the political economy of public employment: a model for Austria

Authors

CHRISTL, MICHAEL, Koeppl-Turyna, Monika

External publication

Si

Means

Empirica

Scope

Article

Nature

Científica

JCR Quartile

SJR Quartile

JCR Impact

0.836

SJR Impact

0.364

Publication date

01/08/2018

ISI

000438433600008

Scopus Id

2-s2.0-85020107224

Abstract

In this work, we simulate the effects of the tax autonomy of the Austrian states on the levels of public employment in each state. We show that depending on the strength of the public sector lobby, tax autonomy would require a reduction of employment in the public sector of between 25 and 35% of the current level. We also show that tax autonomy increases welfare levels by 1-1.5%; that is, the positive change in the disposable income of the workers more than offsets the welfare loss resulting from the lower provision of public goods. Finally, we show that the reduction of public employment is superior in terms of welfare to an alternative scenario in which employment levels are held constant but the wage levels in the public sector are adjusted.

Keywords

Tax competition; Lobbying; Probabilistic voting; Austria

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