A Positive Theory of Unemployment Insurance and Employment Protection
The objective of this paper is to provide a political economy explanation of the empirically observed negative correlation between employment protection and insurance. We study an economy composed of four groups of agents (capitalists, unemployed people, low- and high-skilled workers), each one represented by a politician. Politicians first form political parties and then compete in a winner-takes-all election by simultaneously proposing policy bundles composed of an employment protection level and an unemployment benefit. We first show that, in the absence of parties (i.e., in a citizen-candidate model), low-skilled workers are decisive and support a maximum employment protection level together with some unemployment benefit. We then obtain that, under some conditions, allowing for party formation results in all policy equilibria being in the Pareto set of the coalition formed by high-skilled workers together with unemployed people. Policies in this Pareto set exhibit a negative correlation between employment protection and unemployment benefit.
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- Gilles Saint-Paul, 2002.
"The Political Economy of Employment Protection,"
Journal of Political Economy,
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- Saint-Paul, Gilles, 1999.
"Assessing the Political Viability of Labour Market Reform: The Case of Employment Protection,"
CEPR Discussion Papers
2136, C.E.P.R. Discussion Papers.
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"The Political Economy of Corporate Governance,"
CSEF Working Papers
29, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy, revised 01 Jul 2005.
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"The Political Economy of Flexicurity,"
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"A model of political parties,"
LSE Research Online Documents on Economics
540, London School of Economics and Political Science, LSE Library.
- Saint-Paul, Gilles, 1995.
"A Framework for Analysing the Political Support for Active Labour Market Policy,"
CEPR Discussion Papers
1205, C.E.P.R. Discussion Papers.
- Saint-Paul, Gilles, 1998. "A framework for analyzing the political support for active labor market policy," Journal of Public Economics, Elsevier, vol. 67(2), pages 151-165, February.
- Saint-Paul, G., 1995. "A Framework for Analyzing the Political Support for Active Labor Market Policy," DELTA Working Papers 95-12, DELTA (Ecole normale supérieure).
- Smeets, Valerie & Warzynski, Frederic, 2003.
"Job Creation, Job Destruction and Voting Behavior in Poland,"
03-24, University of Aarhus, Aarhus School of Business, Department of Economics.
- Smeets, Valerie & Warzynski, Frederic, 2006. "Job creation, job destruction and voting behavior in Poland," European Journal of Political Economy, Elsevier, vol. 22(2), pages 503-519, June.
- Valä¿½ie Smeets & Frederic Warzynski, 2003. "Job Creation, Job Destruction and Voting Behavior in Poland," LICOS Discussion Papers 13903, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
- Daniel Cohen & Arnaud Lefranc & Gilles Saint-Paul, 1997. "French unemployment: a transatlantic perspective," Economic Policy, CEPR;CES;MSH, vol. 12(25), pages 265-292, October.
- Chung, Yoon-Kyung & Jeong, Jinook, 2008. "Analysis of employment protection laws and unemployment benefits," Economics Letters, Elsevier, vol. 99(1), pages 144-146, April.
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