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Subsidising Education with Unionised Labour Markets

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  • Wöhlbier, Florian

Abstract

It is well known from the literature that a unionisation of labour markets leads to an increase in wages and a decrease in employment. However, in these models human capital formation is usually taken as given. This paper internalises the education decision and shows that a unionisation of the labour market for unskilled workers will also lead to an inefficiently low education level. We discuss the effects of an education subsidy. It will turn out that both the way of financing and the reaction of the trade union to tax rate changes are crucial for the employment and welfare effects.

Suggested Citation

  • Wöhlbier, Florian, 2002. "Subsidising Education with Unionised Labour Markets," Discussion Papers in Economics 7, University of Munich, Department of Economics.
  • Handle: RePEc:lmu:muenec:7
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    File URL: https://epub.ub.uni-muenchen.de/7/1/0202_woehlbier.pdf
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    References listed on IDEAS

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    1. Ashenfelter, Orley & Ham, John, 1979. "Education, Unemployment, and Earnings," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 99-116, October.
    2. Teulings, Coen & Koopmanschap, Marc, 1989. "An econometric model of crowding out of lower education levels," European Economic Review, Elsevier, vol. 33(8), pages 1653-1664, October.
    3. Ken Binmore & Ariel Rubinstein & Asher Wolinsky, 1986. "The Nash Bargaining Solution in Economic Modelling," RAND Journal of Economics, The RAND Corporation, vol. 17(2), pages 176-188, Summer.
    4. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173.
    5. Nickell, Stephen, 1979. "Education and Lifetime Patterns of Unemployment," Journal of Political Economy, University of Chicago Press, vol. 87(5), pages 117-131, October.
    6. Nicholas M. Kiefer, 1985. "Evidence on the Role of Education in Labor Turnover," Journal of Human Resources, University of Wisconsin Press, vol. 20(3), pages 445-452.
    7. Kettunen, Juha, 1997. "Education and unemployment duration," Economics of Education Review, Elsevier, vol. 16(2), pages 163-170, April.
    8. Heckman, James J, 1976. "A Life-Cycle Model of Earnings, Learning, and Consumption," Journal of Political Economy, University of Chicago Press, vol. 84(4), pages 11-44, August.
    9. Kodde, David A., 1988. "Unemployment expectations and human capital formation," European Economic Review, Elsevier, vol. 32(8), pages 1645-1660, October.
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    12. Brunello, Giorgio, 2001. "Unemployment, Education and Earnings Growth," IZA Discussion Papers 311, Institute for the Study of Labor (IZA).
    13. Daron Acemoglu, 1997. "Training and Innovation in an Imperfect Labour Market," Review of Economic Studies, Oxford University Press, vol. 64(3), pages 445-464.
    14. Manning, Alan, 1987. "An Integration of Trade Union Models in a Sequential Bargaining Framework," Economic Journal, Royal Economic Society, vol. 97(385), pages 121-139, March.
    15. Clemens Fuest & Bernd Huber, 2001. "Tax Progression and Human Capital in Imperfect Labour Markets," German Economic Review, Verein für Socialpolitik, vol. 2(1), pages 1-18, February.
    16. Johnson, George E, 1984. "Subsidies for Higher Education," Journal of Labor Economics, University of Chicago Press, vol. 2(3), pages 303-318, July.
    17. Bean, C R & Layard, P R G & Nickell, S J, 1986. "The Rise in Unemployment: A Multi-country Study," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages 1-22, Supplemen.
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    More about this item

    Keywords

    Human Capital ; Unemployment ; Subsidisation;

    JEL classification:

    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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