Unions, Firing Costs, and Unemployment
AbstractWe study the effects of firing costs in unionized economies with heterogeneous workers. We consider an overlapping generations model where workers participate in the labour market both when young and when old. All workers belong to the same union that sets wages unilaterally. We find that at given wages firing costs increase youth unemployment and decrease old-age unemployment. However, once the wage response is considered, firing costs increase both youth and old-age unemployment. Indeed, knowing that when firing costs are higher firms refrain from firing, the union increases the wage of old workers, and, therefore, old-age unemployment increases. Copyright 2008 The Author. Journal compilation 2008 CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd.
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Bibliographic InfoArticle provided by CEIS in its journal LABOUR.
Volume (Year): 22 (2008)
Issue (Month): 3 (09)
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Other versions of this item:
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
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