Buffer funding of unemployment insurance in a dynamic labour union model
AbstractIn this paper we study the implications of the unemployment insurance (UI) financing system on wage levels and employment when labour markets are unionised and the revenues of the firms are stochastic. We use the basic monopoly union approach of wage and employment determination and assume that unemployment benefits are financed by employees’ UI contributions to the union’s UI fund and by the government’s tax revenue. The main focus of this paper is on the effects of UI buffer funding on employment fluctuations. We show that, compared with the pay-as-you-go financing system, buffer funding stabilises the economy by decreasing employment fluctuations where wages are flexible. If wages are rigid, buffer funding stabilises net wage variations, but has hardly any effect on employment fluctuations.
Download InfoIf 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.
Bibliographic InfoPaper provided by Bank of Finland in its series Research Discussion Papers with number 24/2003.
Length: 33 pages
Date of creation: 21 Oct 2003
Date of revision:
unemployment insurance; unions; stabilisation; buffer funding;
Find related papers by JEL classification:
- E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination
- J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
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.:
- Manning, Alan, 1993. " A Dynamic Model of Union Power, Wages and Employment," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 95(2), pages 175-93.
- Coles, Melvyn G & Hildreth, Andrew, 1996.
"Wage Bargaining, Inventories, and Union Legislation,"
CEPR Discussion Papers, C.E.P.R. Discussion Papers
1361, C.E.P.R. Discussion Papers.
- Coles, Melvyn G & Hildreth, Andrew K G, 2000. "Wage Bargaining, Inventories, and Union Legislation," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 67(2), pages 273-93, April.
- Holmlund, Bertil & Lundborg, Per, 1996.
"Wage Bargaining, Union Membership, and the Organization of Unemployment Insurance,"
Working Paper Series, Uppsala University, Department of Economics
1996:17, Uppsala University, Department of Economics.
- Holmlund, Bertil & Lundborg, Per, 1999. "Wage bargaining, union membership, and the organization of unemployment insurance," Labour Economics, Elsevier, Elsevier, vol. 6(3), pages 397-415, September.
- Oswald, Andrew J, 1985. " The Economic Theory of Trade Unions: An Introductory Survey," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 87(2), pages 160-93.
- repec:fth:bfdipa:10/2001 is not listed on IDEAS
- Koskela, Erkki & Schob, Ronnie, 1999.
"Does the composition of wage and payroll taxes matter under Nash bargaining?,"
Economics Letters, Elsevier,
Elsevier, vol. 64(3), pages 343-349, September.
- Koskela, E. & Schob, R., 1998. "Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining," University of Helsinki, Department of Economics, Department of Economics 443, Department of Economics.
- Erkki Koskela & Ronnie SchÃ¶b, 1999. "Does the Composition of Wage and Payroll Taxes Matter Under Nash Bargaining?," Discussion Papers, Government Institute for Economic Research Finland (VATT) 203, Government Institute for Economic Research Finland (VATT).
- Ripatti, Antti & Vilmunen, Jouko, 2001. "Declining labour share â€“ Evidence of a change in underlying production technology?," Research Discussion Papers, Bank of Finland 10/2001, Bank of Finland.
- Kidd, David P & Oswald, Andrew J, 1987. "A Dynamic Model of Trade Union Behaviour," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 54(215), pages 355-65, August.
- Leach, John, 1997. "Inventories and Wage Bargaining," Journal of Economic Theory, Elsevier, Elsevier, vol. 75(2), pages 433-463, August.
- Holmlund, Bertil & Lundborg, Per, 1989. "Unemployment insurance schemes for reducing the natural rate of unemployment," Journal of Public Economics, Elsevier, Elsevier, vol. 38(1), pages 1-15, February.
- Gary Chamberlain & Charles A. Wilson, 2000.
"Optimal Intertemporal Consumption Under Uncertainty,"
Review of Economic Dynamics,
Elsevier for the Society for Economic Dynamics, vol. 3(3), pages 365-395, July.
- Coles, Melvyn & Smith, Eric, 1998. "Strategic bargaining with firm inventories," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 23(1), pages 35-54, September.
- CastrÃ©n, Olli & Takalo , Tuomas & Wood , Geoffrey, 2004.
"Labour market reform and the sustainability of exchange rate pegs,"
Research Discussion Papers, Bank of Finland
22/2004, Bank of Finland.
- CastrÃ©n, Olli & Takalo, Tuomas & Wood, Geoffrey, 2004. "Labour market reform and the sustainability of exchange rate pegs," Working Paper Series, European Central Bank 0406, European Central Bank.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman).
If references are entirely missing, you can add them using this form.