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Unemployment may be lower if unions bargain over wages and employment


Egger, H (2002). Unemployment may be lower if unions bargain over wages and employment. Labour, 16(1):103-133.

Abstract

This paper addresses the question under which circumstances unemployment can be lower if unions bargain over wages and employment in a general equilibrium framework. Thereby, it turns out that the unemployment rate may negatively depend on the wage rate, if the unemployment compensation scheme contains a constant real term in addition to the replacement ratio component. This is, compared with a pure replacement ratio scheme, the more plausible formalization of the real world’s compensation systems, at least for European countries. Besides the theoretical analysis, the paper also derives political implications by identifying the relevant parameters for the decision on whether weakening unions will be a good strategy for an economy to overcome its unemployment problem.

This paper addresses the question under which circumstances unemployment can be lower if unions bargain over wages and employment in a general equilibrium framework. Thereby, it turns out that the unemployment rate may negatively depend on the wage rate, if the unemployment compensation scheme contains a constant real term in addition to the replacement ratio component. This is, compared with a pure replacement ratio scheme, the more plausible formalization of the real world’s compensation systems, at least for European countries. Besides the theoretical analysis, the paper also derives political implications by identifying the relevant parameters for the decision on whether weakening unions will be a good strategy for an economy to overcome its unemployment problem.

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Additional indexing

Item Type:Journal Article, refereed, original work
Communities & Collections:03 Faculty of Economics > Department of Economics
Dewey Decimal Classification:330 Economics
Language:English
Date:2002
Deposited On:06 May 2008 13:04
Last Modified:05 Apr 2016 12:23
Publisher:Wiley-Blackwell
ISSN:1121-7081
Additional Information:The definitive version is available at www.blackwell-synergy.com
Publisher DOI:10.1111/1467-9914.00189
Permanent URL: http://doi.org/10.5167/uzh-2463

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