Subsidizing versus Experience Rating of Unemployment Insurance in Unionized Labor Markets
Alternative ways to organize government subsidies to unemployment insurance (UI) are analyzed in a right-to-manage model where industry-level unions run UI funds of their own. It is shown that equilibrium unemployment is decreasing in the share of UI financed by the employed union members. A reduction in the proportional subsidies matched by an increase in the lump-sum grant is shown to bring about wage moderation and improve employment. If labor-market parties can influence the level of benefits, a subsidy scheme with fixed assistance per unemployed is preferable to one covering a fixed share of the total UI costs.
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Volume (Year): 60 (2004)
Issue (Month): 2 (August)
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