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Unemployment Risk, the Housing Market and the Effects of Decentralised Redistribution

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  • John Ermisch

Abstract

The paper examines the general equilibrium effects of benefits to the unemployed and the taxes to pay for them in a two country model in which people move to maximise expected utility. Wages are set by unions, and unemployment emerges as an equilibrium phenomenon. Wage setting institutions are found to be important for assessing the welfare effects of redistribution from the employed to the unemployed. The analysis finds that, with monopoly unions, more redistribution tends to repel population from the country increasing redistribution and to reduce welfare in both countries, but the opposite is the case in a model in which wage setting does not depend on unemployment benefits and taxes. These effects are dampened by the combination of risk averse consumers and inelastic housing supply. Copyright Kluwer Academic Publishers 1998

Suggested Citation

  • John Ermisch, 1998. "Unemployment Risk, the Housing Market and the Effects of Decentralised Redistribution," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 5(2), pages 187-202, May.
    • Handle: RePEc:kap:itaxpf:v:5:y:1998:i:2:p:187-202
    DOI: 10.1023/A:1008642421501
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    References listed on IDEAS

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