Tax structure and the choice of compensation system

Citation

Hart RA & Moutos T (1994) Tax structure and the choice of compensation system. European Journal of Political Economy, 10 (4), pp. 765-781. https://doi.org/10.1016/0176-2680%2894%2990037-X

Abstract
We evaluate firm/union preferences for pure wage and profit sharing compensation under the generalized Nash bargaining solution concept. Emphasis is given to the effects of taxes on income as well as profit and payroll taxes. Taxes are shown to play an important role and their assessment is extended to embrace the effects of payroll tax ceilings. Finally, we consider whether differential labour/capital taxes and subsidies might influence the parties' choice of compensation system.

Keywords
Wages; Profit shares; Nash bargaining; Taxation effects; Capital/labour subsidies

Journal
European Journal of Political Economy: Volume 10, Issue 4