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Unemployment May Be Lower if Unions Bargain over Wages and Employment

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  • Hartmut Egger

Abstract

This paper addresses the question under which circumstances unemployment can be lower if unions bargain over wages and employment in a general equilibrium framework. Thereby, it turns out that the unemployment rate may negatively depend on the wage rate, if the unemployment compensation scheme contains a constant real term in addition to the replacement ratio component. This is, compared with a pure replacement ratio scheme, the more plausible formalization of the real world’s compensation systems, at least for European countries. Besides the theoretical analysis, the paper also derives political implications by identifying the relevant parameters for the decision on whether weakening unions will be a good strategy for an economy to overcome its unemployment problem.

Suggested Citation

  • Hartmut Egger, 2002. "Unemployment May Be Lower if Unions Bargain over Wages and Employment," LABOUR, CEIS, vol. 16(1), pages 103-133, March.
    • Handle: RePEc:bla:labour:v:16:y:2002:i:1:p:103-133
    DOI: 10.1111/1467-9914.00189
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    Cited by:

    1. Beissinger, Thomas & Büsse, Oliver, 2002. "The Impact of the Unemployment Benefit System on International Spillover Effects," University of Regensburg Working Papers in Business, Economics and Management Information Systems 376, University of Regensburg, Department of Economics.
    2. Daniel Cardona & Fernando Sánchez-Losada, 2004. "The Unemployment Benefit System: a Redistributive or an Insurance Institution?," DEA Working Papers 8, Universitat de les Illes Balears, Departament d'Economía Aplicada.

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