Kessing, Sebastian G.; Konrad, Kai A.
Union strategy and optimal direct taxation.
In: Journal of Public Economics, Vol. 90, No. 1-2: pp. 393-402
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Restrictions on working hours are more important in countries with a large welfare state. We show that this empirical observation is consistent with the strategic effects of such restrictions in a welfare state in the context of optimal direct taxation in the tradition of Mirrlees (1971) Mirrlees, J.A., 1971. An exploration in the theory of optimum income taxation. Review of Economic Studies 38, 175-208. Our results also apply to non-welfarist states that have income redistribution, but not in purely extortionary states. © 2005 Elsevier B.V. All rights reserved.