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Subsidising Education with Unionised Labour Markets

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  • Wöhlbier, Florian

Abstract

It is well known from the literature that a unionisation of labour markets leads to an increase in wages and a decrease in employment. However, in these models human capital formation is usually taken as given. This paper internalises the education decision and shows that a unionisation of the labour market for unskilled workers will also lead to an inefficiently low education level. We discuss the effects of an education subsidy. It will turn out that both the way of financing and the reaction of the trade union to tax rate changes are crucial for the employment and welfare effects.

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Bibliographic Info

Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 7.

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Date of creation: Mar 2002
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Handle: RePEc:lmu:muenec:7

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Keywords: Human Capital ; Unemployment ; Subsidisation;

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  1. Orley Ashenfelter & John C. Ham, 1979. "Education, Unemployment and Earnings," Working Papers 501, Princeton University, Department of Economics, Industrial Relations Section..
  2. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 84(4), pages S11-44, August.
  3. Kettunen, Juha, 1997. "Education and unemployment duration," Economics of Education Review, Elsevier, Elsevier, vol. 16(2), pages 163-170, April.
  4. Clemens Fuest & Bernd Huber, . "Tax Progression and Human Capital in Imperfect Labour Markets," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 98-03, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  5. Teulings, Coen & Koopmanschap, Marc, 1989. "An econometric model of crowding out of lower education levels," European Economic Review, Elsevier, Elsevier, vol. 33(8), pages 1653-1664, October.
  6. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199279173, October.
  7. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 2(3), pages 303-18, July.
  8. Kodde, David A., 1988. "Unemployment expectations and human capital formation," European Economic Review, Elsevier, Elsevier, vol. 32(8), pages 1645-1660, October.
  9. Acemoglu, Daron, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 64(3), pages 445-64, July.
  10. Bean, C R & Layard, P R G & Nickell, S J, 1986. "The Rise in Unemployment: A Multi-country Study," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 53(210(S)), pages S1-22, Supplemen.
  11. Fuest, Clemens & Huber, Bernd, 2001. "Tax progression and human capital in imperfect labour markets," Munich Reprints in Economics, University of Munich, Department of Economics 20291, University of Munich, Department of Economics.
  12. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
  13. Nicholas M. Kiefer, 1985. "Evidence on the Role of Education in Labor Turnover," Journal of Human Resources, University of Wisconsin Press, vol. 20(3), pages 445-452.
  14. Nickell, Stephen, 1979. "Education and Lifetime Patterns of Unemployment," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(5), pages S117-31, October.
  15. Lockwood, Ben & Manning, Alan, 1993. "Wage setting and the tax system theory and evidence for the United Kingdom," Journal of Public Economics, Elsevier, Elsevier, vol. 52(1), pages 1-29, August.
  16. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 97(385), pages 121-39, March.
  17. Brunello, Giorgio, 2001. "Unemployment, Education and Earnings Growth," IZA Discussion Papers 311, Institute for the Study of Labor (IZA).
  18. Nash, John, 1950. "The Bargaining Problem," Econometrica, Econometric Society, Econometric Society, vol. 18(2), pages 155-162, April.
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