Optimal Intervention in an Economy with Trade Unions
The paper studies the theory of optimal intervention in an economy with trade unions. It is shown that the traditional remedy, a flat employment subsidy in the union sector, cannot produce a first-best welfare optimum. But non-linear wage and employment subsidies can generate a full social optimum, and the paper examines their optimal structure. One appealing form turns out to be a wage subsidy schedule which is an increasing and concave function on union employment. Employment subsidy schedules and statutory wages policy are also discussed.
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|Date of creation:||1982|
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