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Dynamic wage bargaining if benefits are tied to individual wages


Beissinger, T; Egger, H (2004). Dynamic wage bargaining if benefits are tied to individual wages. Oxford Economic Papers, 56(3):437-460.

Abstract

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. From this comparison it becomes evident how the shape and position of the wage-setting curve depends on the specification of the unemployment benefit system. We also demonstrate that a reduction of unemployment benefits of those who become unemployed after the bargaining period leads to higher equilibrium unemployment.

Abstract

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. From this comparison it becomes evident how the shape and position of the wage-setting curve depends on the specification of the unemployment benefit system. We also demonstrate that a reduction of unemployment benefits of those who become unemployed after the bargaining period leads to higher equilibrium unemployment.

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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:2004
Deposited On:30 Apr 2008 08:45
Last Modified:02 Jan 2018 08:07
Publisher:Oxford University Press
ISSN:0030-7653
Additional Information:The accepted manuscript is a pre-copy-editing, author-produced PDF of an article accepted for publication in Oxford Economic Papers following peer review. The definitive publisher-authenticated version [Oxford Economic Papers, 56(3):437-460] is available online at: http://oep.oxfordjournals.org/cgi/content/abstract/56/3/437
Publisher DOI:https://doi.org/10.1093/oep/gpf050

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