Rebalancing Unemployment Benefits in a Unionized Labour Market

Claus Thustrup Hansen and Hans Jørgen Jacobsen
Authors registered in the RePEc Author Service: Claus Thustrup Kreiner

No 97-07, EPRU Working Paper Series from Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics

Abstract: The basic trade union model is extended to allow for a more sophisticated unemployment benefit system consisting of two benefit levels, one for short-term and one for long-term unemployed, and a rule determining whether an unemployed is short- or long-term. The purpose of this extension is twofold; to get a more realistic analysis of the actual benefit systems in most countries, and to analyse alternative reforms to the traditional one of changing a uniform benefit level. Reforms that rebalance the benefit rates holding constant either expected utility of an unemployed, aggregate benefit expenditures, or aggregate utility of union members can reduce unemployment.

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