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.
|Date of creation:||Jun 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gilles Saint Paul, 1999.
"The political economy of employment protection,"
Economics Working Papers
355, Department of Economics and Business, Universitat Pompeu Fabra.
- 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).
- 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.
- 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.
- Smeets, Valerie & Warzynski, Frederic, 2003. "Job Creation, Job Destruction and Voting Behavior in Poland," Working Papers 03-24, University of Aarhus, Aarhus School of Business, Department of Economics.
- 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.
- Gilles Saint-Paul, 1999. "Assessing the political viability of labor market reform : the case of employment protection," Review, Federal Reserve Bank of St. Louis, issue May, pages 73-87.
- Gilles Saint Paul, 1998. "Assesing the political viability of labour market reform: The case of employment protection," Economics Working Papers 346, Department of Economics and Business, Universitat Pompeu Fabra.
- Pagano, Marco & Volpin, Paolo, 2001.
"The Political Economy of Corporate Governance,"
CEPR Discussion Papers
2682, C.E.P.R. Discussion Papers.
- 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.
- Woojin Lee & John E. Roemer, 2005. "The Rise and Fall of Unionised Labour Markets: A Political Economy Approach," Economic Journal, Royal Economic Society, vol. 115(500), pages 28-67, 01.
- Hassler, John & Rodriguez Mora, Jose V., 1999. "Employment turnover and the public allocation of unemployment insurance," Journal of Public Economics, Elsevier, vol. 73(1), pages 55-83, July.
- Pallage, Stephane & Zimmermann, Christian, 2001. "Voting on Unemployment Insurance," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 903-23, November.
- Tito Boeri & J. Ignacio Conde-Ruiz & Vincenzo Galasso, 2012.
"The Political Economy Of Flexicurity,"
Journal of the European Economic Association,
European Economic Association, vol. 10(4), pages 684-715, 08.
- Gilat Levy, 2004.
"A model of political parties,"
LSE Research Online Documents on Economics
540, London School of Economics and Political Science, LSE Library.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:7333. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.