Wage Bargaining and Employment under Different Employment Insurance Contribution Policies
We examine alternative unemployment insurance (UI) contribution policies in an economy where wages are set by a monopoly union and firms face stochastic revenue shocks. Unemployment benefits are financed from UI contributions that the government imposes on firms. We show that the impact of changes in the UI contribution on the union's wage demand and on the firm's demand for labor depends crucially on the elasticity of substitution between the factors of production in the economy. Thus, the consequences of the different UI policies change fundamentally with alterations in the elasticity.
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Volume (Year): 60 (2004)
Issue (Month): 4 (December)
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