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Union Power as a Reason for Europe Not to Introduce Experience Rating?

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Author Info
Florian Baumann
Nikolai Stähler

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Abstract

Theoretical economic literature dealing with the financing of unemployment insurance finds that experience rating helps to solve the externality caused by individually efficient but socially inefficient dismissals and hence reduces unemployment. This is, however, found in models where workers and firms bargain over wages individually. Introducing unionized wage bargaining - which at least in continental Europe is a defining feature of the economy - may reverse the result. This paper provides an example showing that wage setting by a monopoly union can result in an increase in unemployment

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Publisher Info
Article provided by Mohr Siebeck, Tübingen in its journal Journal of Institutional and Theoretical Economics.

Volume (Year): 164 (2008)
Issue (Month): 3 (September)
Pages: 568-585
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Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200809)164:3_568:upaarf_2.0.tx_2-9

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Keywords:

Find related papers by JEL classification:
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
J64 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment: Models, Duration, Incidence, and Job Search
J65 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Unemployment Insurance; Severance Pay; Plant Closings
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

Cited by:
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  1. Moser, Christoph & Stähler, Nikolai, 2009. "Spillover effects of minimum wages in a two-sector search model," Discussion Paper Series 1: Economic Studies 2009,01, Deutsche Bundesbank, Research Centre. [Downloadable!]
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