This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Subsidizing Extra Jobs: Promoting Employment by Taming the Unions

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Andreas Knabe ()
Ronnie Schöb ()

Additional information is available for the following registered author(s):

Abstract

We study the subsidization of extra jobs in a general equilibrium framework. While the previous literature focuses on symmetric marginal employment subsidies where firms are rewarded when they increase employment but punished when they reduce their workforce, we consider an asymmetric scheme that only rewards employment expansion. This changes the incidence substantially. In the asymmetric case without punishment, it becomes less costly for firms to lay off a substantial fraction of their workforce when trade unions raise wages. This tames the unions, which causes wage moderation and raises aggregate employment and welfare. For moderate subsidy rates, all unions prefer to restrain their wage claims. At sufficiently high subsidy rates, labor market conditions improve so much that some unions enforce higher wages and let their firms shrink. This displacement of firms might have a negative impact on employment and welfare.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help file. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.cesifo.de/DocCIDL/cesifo1_wp2130.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by CESifo GmbH in its series CESifo Working Paper Series with number CESifo Working Paper No. 2130.

Download reference. The following formats are available: HTML, plain text, BibTeX, RIS (EndNote), ReDIF
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:ces:ceswps:_2130

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Web page: http://www.cesifo.de

For technical questions regarding this item, or to correct its listing, contact: (Julio Saavedra).

Related research
Keywords: marginal employment subsidies unemployment general equilibrium

Other versions of this item:

Find related papers by JEL classification:
H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
J38 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Public Policy
J68 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Public Policy

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.:

  1. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier. [Downloadable!] (restricted)
    Other versions:
  2. Giuseppe Carone & Herwig Immervoll & Dominique Paturot & Aino Salomäki, 2004. "Indicators of Unemployment and Low-Wage Traps: Marginal Effective Tax Rates on Employment Incomes," OECD Social Employment and Migration Working Papers 18, OECD Directorate for Employment, Labour and Social Affairs. [Downloadable!]
  3. Olivier Blanchard & Francesco Giavazzi, 2003. "Macroeconomic Effects Of Regulation And Deregulation In Goods And Labor Markets," The Quarterly Journal of Economics, MIT Press, vol. 118(3), pages 879-907, August. [Downloadable!] (restricted)
    Other versions:
  4. Hart, Robert A, 1989. "The Employment and Hours Effects of a Marginal Employment Subsidy," Scottish Journal of Political Economy, Scottish Economic Society, vol. 36(4), pages 385-95, November.
  5. Oswald, Andrew J, 1984. "Three Theorems on Inflation Taxes and Marginal Employment Subsidies," Economic Journal, Royal Economic Society, vol. 94(375), pages 599-611, September. [Downloadable!] (restricted)
    Other versions:
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
    Other versions:
  7. Andreas Knabe & Ronnie Schöb & Joachim Weimann, 2006. "Marginal Employment Subsidization: A New Concept and a Reappraisal," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  8. Bishop, John & Haveman, Robert, 1979. "Selective Employment Subsidies: Can Okun's Law be Repealed?," American Economic Review, American Economic Association, vol. 69(2), pages 124-30, May. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? All full texts are decentralized with the publishers, none reside on this server, thus making it possible to offer this service for free to all parties.

This page was last updated on 2008-9-22.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.