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Financing of Unemployment Insurance under Wage Bargaining

Author

Listed:
  • Marja-Liisa Halko

    () (Department of Economics, HECER and RUESG, University of Helsinki, Finland)

Abstract

In conventional trade union models, it is assumed that the unemployment benefits of the unemployed union members are provided by the government. We examine the case where in a right-to-manage model, the union finances part of the benefits of its unemployed members and therefore runs an unemployment insurance (UI) fund, to which employed members pay insurance premiums. Part of the fund’s income derives from the UI taxes the government imposes on both employees and employers. In this paper, we show that wages fall and employment rises when the government increases the experience rating or decreases unemployment benefits. A rise in profit tax also increases employment, but changes in UI taxes on the payroll or income have no employment effect.

Suggested Citation

  • Marja-Liisa Halko, 2005. "Financing of Unemployment Insurance under Wage Bargaining," Finnish Economic Papers, Finnish Economic Association, vol. 18(1), pages 3-15, Spring.
  • Handle: RePEc:fep:journl:v:18:y:2005:i:1:p:3-15
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    Cited by:

    1. Horst Feldmann, 2011. "The Unemployment Puzzle of Corporate Taxation," Public Finance Review, , vol. 39(6), pages 743-769, November.

    More about this item

    JEL classification:

    • 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

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