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Equilibrium earning premium and pension schemes: The long-run macroeconomic effects of the union

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  • Bruno Chiarini
  • Paolo Piselli

Abstract

Using the theoretical framework based on the monopoly union model described in Kidd and Oswald (1987) and Jones (1987), this paper provides an explicit framework to assess the role of wage moderation in Italy in the last twenty years. There are two crucial ingredients to the model: the composition of union membership and the pension system. We show that the increase in pensioners' membership in the presence of a pay-as-you-go (PAYG) pension scheme has led unions to moderate wage claims. However, this result is reversed when we shift from a PAYG system to a fully-funded (FF) regime (recently adopted in Italy): in this case, the model predicts a rise in wages with respect to the standard model, regardless of the share of pensioners in the membership.

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Bibliographic Info

Paper provided by D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy in its series Discussion Papers with number 2_2012.

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Date of creation: 10 Sep 2012
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Handle: RePEc:prt:dpaper:2_2012

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Keywords: Union membership; Pensioners; Wage-pension trade-off;

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