@TechReport{iza:izadps:dp2861,
            	author={Koskela, Erkki and Schöb, Ronnie},
            	title={How Tax Progression Affects Effort and Employment},
            	year={2007},
	month={Jun},
            	institution={Institute of Labor Economics (IZA)},
            	address={Bonn},
            	type={IZA Discussion Paper},
            	number={2861},
            	url={https://www.iza.org/publications/dp2861},
	abstract={Within an efficiency wage framework, we study the effects of two revenue-neutral tax reforms that change the progressivity of the labour tax system. A revenue-neutral increase in both the wage tax and tax exemption and a revenue-neutral change in the composition of labour taxation towards the tax with the smaller tax base will lead to the same results: they moderate wages, workers’ effort, effective labour input and aggregate output. Whether employment rises or falls, however, depends in both reforms on the magnitude of the pre-reform total tax wedge. The larger this tax wedge is, the more negative is the impact of reforms on workers’ effort. A larger total tax wedge increases the negative effect of tax progression on labour productivity and thus thwarts the positive employment effect of wage moderation.},
	keywords={tax progression;structure of labour taxation;efficiency wages},
            }