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Labor Unions, Unemployment, and Inequality in an OLG-Model with Heterogeneous Agents

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Abstract

As a consequence of falling relative demand for low skilled labor in the OECD, people with no or minor qualification experience a deterioration of their economic situation. While flexible labor markets have led to higher wage differentials in the USA, the major problem of most European countries is the high rate of unemployment of the low skilled. To integrate currently discussed determinants of wage distribution and unemployment into a common context, labor unions and qualification differences in labor supply are introduced to an OLG-model with heterogeneous agents. The model generates skill specific unemployment rates and a wage dispersion affected by production technology, wage setting procedure, and qualification structure of labor supply. As an application of the model, the relative importance of wage dispersion, unemployment, and lifelong learning for economic growth and income distribution can be evaluated.

Suggested Citation

  • Jana Kremer, 2001. "Labor Unions, Unemployment, and Inequality in an OLG-Model with Heterogeneous Agents," Discussion Paper Series 207, Universitaet Augsburg, Institute for Economics.
  • Handle: RePEc:aug:augsbe:0207
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    File URL: http://www.wiwi.uni-augsburg.de/vwl/institut/paper/207.pdf
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    References listed on IDEAS

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    1. Nickell, Stephen & Layard, Richard, 1999. "Labor market institutions and economic performance," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 46, pages 3029-3084 Elsevier.
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    5. Blau, Francine D & Kahn, Lawrence M, 1996. "International Differences in Male Wage Inequality: Institutions versus Market Forces," Journal of Political Economy, University of Chicago Press, vol. 104(4), pages 791-836, August.
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    More about this item

    Keywords

    wage and income inequality; unemployment; trade unions; overlapping generations;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models

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