Dynamic Wage Bargaining if Benefits are Tied to Individual Wages
In dynamic wage bargaining models it is usually assumed that individual unemployment benefits are a fraction of the average wage level. In most countries, however, unemployment benefits are instead tied to the previous level of individually earned wages. We show how the analysis has to be modified if this fact is taken into account and compare our findings for the wage-setting curve with outcomes under other unemployment compensation schemes. In particular, we show that the widely used vertical wage-setting curve relies on more restrictive assumptions than usually considered. We also demonstrate that a reduction of unemploy-ment benefits of those who get unemployed after the bargaining period leads to higher equilibrium unemployment.
|Date of creation:||Nov 2001|
|Date of revision:|
|Publication status:||published in: Oxford Economic Papers, 2004, 56 (3), 437-460|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
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.:
- Blanchard, Olivier Jean & Kiyotaki, Nobuhiro, 1987. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, American Economic Association, vol. 77(4), pages 647-66, September.
- Hoel, Michael, 1991.
"Union Wage Policy: The Importance of Labour Mobility and the Degree of Centralization,"
London School of Economics and Political Science, vol. 58(230), pages 139-53, May.
- Hoel, M., 1989. "Union Wages Policy: The Importance Of Labour Mobility And The Degree Of Centralization," Memorandum 05/1989, Oslo University, Department of Economics.
- Manning, Alan, 1993.
"Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations,"
Royal Economic Society, vol. 103(416), pages 98-118, January.
- Alan Manning, 1992. "Wage Bargaining and the Phillips Curve: The Identification and Specification of Aggregate Wage Equations," CEP Discussion Papers dp0062, Centre for Economic Performance, LSE.
- Richard Layard & Stephen Nickell, 1990. "Is Unemployment Lower if Unions Bargain over Employment?," The Quarterly Journal of Economics, Oxford University Press, vol. 105(3), pages 773-787.
- Manning, Alan, 1991. "The Determinants of Wage Pressure: Some Implications of a Dynamic Model," Economica, London School of Economics and Political Science, vol. 58(231), pages 325-39, August.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp389. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.