Is Unemployment Always Higher when Insiders Decide?

Trine Filges () and Birthe Larsen ()
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Trine Filges: Centre for Labour Market and Social Research, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark
Birthe Larsen: Centre for Labour Market and Social Research, Aarhus School of Business, Postal: The Aarhus School of Business, Prismet, Silkeborgvej 2, DK 8000 Aarhus C, Denmark

No 00-2, CLS Working Papers from University of Aarhus, Aarhus School of Business, Centre for Labour Market and Social Research

Abstract: This paper challenges the traditional view that unemployment is high because insiders determine the union wage. The insiders in this paper are characterized by being more efficient when they search for a job than the outsiders, implying that they experience relatively less unemployment. We assume that wages are determined by a monopoly union and further that a union leader is elected by a majority voting rule. Insiders may prefer a lower wage than outsiders, implying the possibility of lower unemployment when insiders are decisive in the union than if outsiders were decisive in the union.

Keywords: Insiders and outsiders; Search; Uemployment (search for similar items in EconPapers)
JEL-codes: J64 (search for similar items in EconPapers)
Date: Written 2000-03-01
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