Advanced Search
MyIDEAS: Login

A positive theory of the earnings relationship of unemployment benefits

Contents:

Author Info

  • Laszlo Goerke

    ()

  • Markus Pannenberg
  • Heinrich Ursprung

Abstract

Evidently, the benefit-structure of the unemployment insurance has a significant influence on profits and trade union utility. We show for a wage bargaining model that a stronger earnings relationship of unemployment benefits may reduce wages and increase employment. This raises the question as to how the benefit structure is determined in the political process. To answer this question, we consider a government that chooses the earnings relationship with a view to maximising its political support. Our model predicts a strong earnings relationship under right-wing governments and a weak one when the unions' influence is pronounced. Deepening international economic integration has ambiguous effects. Using panel data for 19 OECD countries from 1961 to 2003 we find support for the hypothesized domestic influences and show that the earnings relationship varies negatively with openness.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1007/s11127-009-9558-0
Download Restriction: Access to full text is restricted to subscribers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Article provided by Springer in its journal Public Choice.

Volume (Year): 145 (2010)
Issue (Month): 1 (October)
Pages: 137-163

as in new window
Handle: RePEc:kap:pubcho:v:145:y:2010:i:1:p:137-163

Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100332

Related research

Keywords: Earnings relationship; Panel data; Political support maximization; Wage bargaining; Unemployment benefits; D72; J51; J65;

Other versions of this item:

Find related papers by JEL classification:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Pallage, Stephane & Zimmermann, Christian, 2001. "Voting on Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 903-23, November.
  2. Breitung, J. & Pesaran, M.H., 2005. "Unit Roots and Cointegration in Panels," Cambridge Working Papers in Economics 0535, Faculty of Economics, University of Cambridge.
  3. Oswald, Andrew J, 1982. "The Microeconomic Theory of the Trade Union," Economic Journal, Royal Economic Society, vol. 92(367), pages 576-95, September.
  4. Jörg Lingens & Klaus Wälde, 2009. "Pareto-Improving Unemployment Policies," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 65(2), pages 220-245, June.
  5. Di Tella, R. & MacCulloch, R., 1996. "The Determination of Unemployment Benefits," Economics Series Working Papers 99180, University of Oxford, Department of Economics.
  6. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
  7. Noel Gaston & Douglas Nelson, 2004. "Structural Change and the Labor-market Effects of Globalization," Review of International Economics, Wiley Blackwell, vol. 12(5), pages 769-792, November.
  8. Niklas Potrafke, 2010. "Labor market deregulation and globalization: empirical evidence from OECD countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 146(3), pages 545-571, September.
  9. Andrew Oswald, 1984. "Efficient Contracts are on the Labour Demand Curve: Theory and Facts," Working Papers 555, Princeton University, Department of Economics, Industrial Relations Section..
  10. Grossman, Gene & Helpman, Elhanan, 1993. "Protection for Sale," CEPR Discussion Papers 827, C.E.P.R. Discussion Papers.
  11. Thomas Beissinger & Hartmut Egger, 2004. "Dynamic wage bargaining if benefits are tied to individual wages," Oxford Economic Papers, Oxford University Press, vol. 56(3), pages 437-460, July.
  12. Philip Ducaju & Erwan Gautier & Daphné Momferatou & Mélanie Ward-Warmedinge, 2008. "Institutional features of wage bargaining in 23 European countries, the US and Japan," Working Paper Research 154, National Bank of Belgium.
  13. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, . "Cross-skill Redistribution and the Tradeoff between Unemployment Benefits and Employment Protection," Working Papers 2004-26, FEDEA.
  14. Olivier J. Blanchard & Jean Tirole, 2008. "The Joint Design of Unemployment Insurance and Employment Protection: A First Pass," Journal of the European Economic Association, MIT Press, vol. 6(1), pages 45-77, 03.
  15. Burkhard Heer, 2002. "Should Unemployment Benefits be Related to Previous Earnings?," CESifo Working Paper Series 747, CESifo Group Munich.
  16. Uusitalo, Roope & Verho, Jouko, 2007. "The effect of unemployment benefits on re-employment rates: evidence from the Finnish UI-benefit reform," Working Paper Series 2007:21, IFAU - Institute for Evaluation of Labour Market and Education Policy.
  17. Yang, C C, 1995. "Endogenous Tariff Formation under Representative Democracy: A Probabilistic Voting Model," American Economic Review, American Economic Association, vol. 85(4), pages 956-63, September.
  18. Roland Vaubel, 2008. "The political economy of labor market regulation by the European Union," The Review of International Organizations, Springer, vol. 3(4), pages 435-465, December.
  19. Rothschild, Kurt W, 1986. "'Left' and 'Right' in 'Federal Europe.'," Kyklos, Wiley Blackwell, vol. 39(3), pages 359-76.
  20. John Hassler & José V. Rodriguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 2002. "A Positive Theory of Geographic Mobility and Social Insurance," CESifo Working Paper Series 791, CESifo Group Munich.
  21. Hervé Boulhol, 2006. "Do capital market and trade liberalization trigger labor market deregulation ?," Cahiers de la Maison des Sciences Economiques bla06062, Université Panthéon-Sorbonne (Paris 1).
  22. Coughlin, Peter J. & Mueller, Dennis C. & Murrell, Peter, 1990. "A model of electroral competition with interest groups," Economics Letters, Elsevier, vol. 32(4), pages 307-311, April.
  23. Tito Boeri & J.Ignacio Conde-Ruiz & Vincenzo Galasso, 2003. "Protecting Against Labour Market Risk: Employment Protection or Unemployment Benefits?," Working Papers 239, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
  24. David R. Howell & Miriam Rehm, 2009. "Unemployment compensation and high European unemployment: a reassessment with new benefit indicators," Oxford Review of Economic Policy, Oxford University Press, vol. 25(1), pages 60-93, Spring.
  25. Neugart, Michael, 2005. "Unemployment insurance: The role of electoral systems and regional labour markets," European Journal of Political Economy, Elsevier, vol. 21(4), pages 815-829, December.
  26. Heer, Burkhard & Morgenstern, Albrecht, 2000. "Indexation Of Unemployment Benefits To Previous Earnings, Employment And Wages," Discussion Papers in Economics 30, University of Munich, Department of Economics.
  27. Dur, Robert A J, 2001. "Wage-Setting Institutions, Unemployment, and Voters' Demand for Redistribution Policy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 48(5), pages 517-31, November.
  28. Juan Botero & Simeon Djankov & Rafael Porta & Florencio C. Lopez-De-Silanes, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, MIT Press, vol. 119(4), pages 1339-1382, November.
  29. Booth,Alison L., 1994. "The Economics of the Trade Union," Cambridge Books, Cambridge University Press, number 9780521468398, October.
  30. Wright, Randall, 1986. "The redistributive roles of unemployment insurance and the dynamics of voting," Journal of Public Economics, Elsevier, vol. 31(3), pages 377-399, December.
  31. David M. Drukker, 2003. "Testing for serial correlation in linear panel-data models," Stata Journal, StataCorp LP, vol. 3(2), pages 168-177, June.
  32. Konle-Seidl, Regina & Eichhorst, Werner & Grienberger-Zingerle, Maria, 2007. "Activation policies in Germany : from status protection to basic income support," IAB Discussion Paper 200706, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
  33. Goerke, Laszlo & Madsen, Jakob B., 2003. "Earnings-related unemployment benefits and unemployment," Economic Systems, Elsevier, vol. 27(1), pages 41-62, March.
  34. Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2006. "The Political Economy of Flexicurity," Working Papers 2006-15, FEDEA.
  35. Baldwin, Richard, 1987. "Politically realistic objective functions and trade policy PROFs and tariffs," Economics Letters, Elsevier, vol. 24(3), pages 287-290.
  36. Anesi, Vincent & De Donder, Philippe, 2009. "A Positive Theory of Unemployment Insurance and Employment Protection," CEPR Discussion Papers 7333, C.E.P.R. Discussion Papers.
  37. Michael Neugart, 2008. "The choice of insurance in the labor market," Public Choice, Springer, vol. 134(3), pages 445-462, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Mario Mechtel & Niklas Potrafke, 2011. "Electoral Cycles in Active Labor Market Policies," Working Paper Series of the Department of Economics, University of Konstanz 2011-39, Department of Economics, University of Konstanz.
  2. Niklas Potrafke, 2012. "Political cycles and economic performance in OECD countries: empirical evidence from 1951–2006," Public Choice, Springer, vol. 150(1), pages 155-179, January.
  3. Mechtel, Mario & Potrafke, Niklas, 2009. "Political Cycles in Active Labor Market Policies," MPRA Paper 22780, University Library of Munich, Germany, revised May 2010.
  4. Moyen, Stéphane & Stähler, Nikolai, 2009. "Unemployment insurance and the business cycle: prolong benefit entitlements in bad times?," Discussion Paper Series 1: Economic Studies 2009,30, Deutsche Bundesbank, Research Centre.
  5. Michael Neugart, 2008. "The choice of insurance in the labor market," Public Choice, Springer, vol. 134(3), pages 445-462, March.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:kap:pubcho:v:145:y:2010:i:1:p:137-163. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Guenther Eichhorn) or (Christopher F. Baum).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.