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Dual-Labor Market and Unemployment Compensation

Author

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  • Abe Taro

    (Nagoya Gakuin University, Department of Economics, Japan)

Abstract

This paper discusses the impact of unemployment compensation on the employment and wages of regular and non-regular labor in a dual-labor market. The model in this paper assumes an effective demand constraint and an imperfectly competitive market. The results obtained are as follows. An increase in unemployment compensation increases the wages of regular labor to maintain its productivity. However, this temporarily decreases the employment of regular labor, so that the productivity and wages of non-regular labor decrease. The result is an increase in the relative wage rate of regular labor and the relative amount of non-regular labor employed. This result is independent of any economic regime. In terms of the impact on employment volume, the existence of two regimes, one wage-driven and one profit-driven, is confirmed. However, the effect on employment is weaker if unemployment compensation is financed by taxing profits.

Suggested Citation

  • Abe Taro, 2020. "Dual-Labor Market and Unemployment Compensation," Economics, Sciendo, vol. 8(2), pages 21-35, December.
    • Handle: RePEc:vrs:econom:v:8:y:2020:i:2:p:21-35:n:3
    DOI: 10.2478/eoik-2020-0012
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    References listed on IDEAS

    as
    1. Gilles Saint-Paul, 1997. "Dual Labor Markets: A Macroeconomic Perspective," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262193760, December.
    2. Snezana Radukic & Zoran Mastilo & Zorana Kostic & Ljubisa Vladusic, 2019. "Measuring of The Goods and Labor Markets Efficiency: Comparative Study of Western Balkan Countries," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 15(2), pages 95-109.
    3. Peter Skott, 2017. "Weaknesses of 'wage-led growth'," Review of Keynesian Economics, Edward Elgar Publishing, vol. 5(3), pages 336-359, July.
    4. Ryunosuke Sonoda & Hiroaki Sasaki, 2019. "Differences in wage-determination systems between regular and non-regular employment in a Kaleckian model," Review of Keynesian Economics, Edward Elgar Publishing, vol. 7(3), pages 341-360, July.
    5. Bowles,Samuel, 2012. "The New Economics of Inequality and Redistribution," Cambridge Books, Cambridge University Press, number 9781107601604.
    6. Bowles,Samuel, 2012. "The New Economics of Inequality and Redistribution," Cambridge Books, Cambridge University Press, number 9781107014039.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Dual labor market; unemployment compensation; wage-led economy; Egalitarian policy; Post Keynesian; Globalization;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J42 - Labor and Demographic Economics - - Particular Labor Markets - - - Monopsony; Segmented Labor Markets

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