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Welfare Measurement, Involuntary Unemployment, And Heterogeneity

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  • Thomas Aronsson

Abstract

This paper concerns welfare measurement in an economy with union wage setting, where the equilibrium is characterized by unemployment. Contrary to results derived in the first best, the current value Hamiltonian is not an exact welfare measure in an economy with unemployment. Instead, the welfare measure also depends on “employment effect,” which are caused by the discrepancy between supply and demand in the labor market. In addition, since unemployment gives rise to heterogeneity, distributional effects will also characterize the welfare measure.

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  • Thomas Aronsson, 2010. "Welfare Measurement, Involuntary Unemployment, And Heterogeneity," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 56(3), pages 559-571, September.
    • Handle: RePEc:bla:revinw:v:56:y:2010:i:3:p:559-571
    DOI: 10.1111/j.1475-4991.2010.00402.x
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    References listed on IDEAS

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    Cited by:

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    2. Jan Voelzke & Fabian Goessling, 2016. "Should We Like it? - A Social Welfare Based Quantification of Policy Attractiveness," CQE Working Papers 5716, Center for Quantitative Economics (CQE), University of Muenster.

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