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Pensions and Insider-Outsider Unemployment

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  • Sven Schreiber

Abstract

If workers gain an insider position through past activity, young workers will bear the resulting outsider unemployment burden. In a world where productivity of employed workers rises because of learning-by-doing, and where labor demand is sufficiently elastic, preventing this unemployment (by lowering wages) leads to a higher income tax base in the future. Thus the institution of certain intergenerational transfer schemes provides an incentive for insiders to lower wages. In a stylized overlapping-generations model I show that this effect partially or fully abolishes unemployment in the steady-state equilibria.

Suggested Citation

  • Sven Schreiber, 2005. "Pensions and Insider-Outsider Unemployment," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 161(4), pages 708-728, December.
  • Handle: RePEc:mhr:jinste:urn:sici:0932-4569(200512)161:4_708:paiu_2.0.tx_2-e
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    More about this item

    JEL classification:

    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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