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Subsidizing versus Experience Rating of Unemployment Insurance in Unionized Labor Markets


  • Pekka Sinko


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.

Suggested Citation

  • Pekka Sinko, 2004. "Subsidizing versus Experience Rating of Unemployment Insurance in Unionized Labor Markets," FinanzArchiv: Public Finance Analysis, Mohr Siebeck, Tübingen, vol. 60(2), pages 186-186, August.
  • Handle: RePEc:mhr:finarc:urn:sici:0015-2218(200408)60:2_186:sverou_2.0.tx_2-x

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    References listed on IDEAS

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    Cited by:

    1. Wehke, Sven, 2009. "Union wages, hours of work and the effectiveness of partial coordination agreements," Labour Economics, Elsevier, vol. 16(1), pages 89-96, January.
    2. Dittrich, Marcus, 2006. "Welfare Effects of Union Bargaining Centralisation in a Two-Sector Economy," MPRA Paper 11, University Library of Munich, Germany, revised Sep 2006.
    3. Julia Fath & Clemens Fuest, 2005. "Experience Rating of Unemployment Insurance in the US: A Model for Europe?," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 3(2), pages 45-50, 07.

    More about this item


    unemployment insurance; wage formation; experience rating;

    JEL classification:

    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue


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