Earnings-Related Unemployment Benefits in a Unionised Economy

No 701, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: We show that a stronger earnings relationship of unemployment compensation reduces wages and increases employment in an economy in which wages are determined by a trade union that maximises the rent from unionisation. The opposite result applies for a utilitarian union. Using manufacturing and non-manufacturing data for 16 OECD countries, estimates suggest that a 10% increase in the earnings relationship is associated with a 1.9% fall in manufacturing wages, a 0.6% reduction in non-manufacturing wages and a 7.3% reduction in unemployment.

Keywords: unemployment benefits; unemployment; trade union; panel data; OECD; earnings relationship (search for similar items in EconPapers)
JEL-codes: E24 J51 J65 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2003-01
New Economics Papers: this item is included in nep-lab and nep-pke
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Published - published in: Economic Systems, 2003, 27 (1), 41-62

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