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Financing of Unemployment Insurance under Wage Bargaining

Marja-Liisa Halko

Finnish Economic Papers, 2005, vol. 18, issue 1, 3-15

Abstract: In conventional trade union models, it is assumed that the unemployment benefits of the unemployed union members are provided by the government. We examine the case where in a right-to-manage model, the union finances part of the benefits of its unemployed members and therefore runs an unemployment insurance (UI) fund, to which employed members pay insurance premiums. Part of the fund’s income derives from the UI taxes the government imposes on both employees and employers. In this paper, we show that wages fall and employment rises when the government increases the experience rating or decreases unemployment benefits. A rise in profit tax also increases employment, but changes in UI taxes on the payroll or income have no employment effect.

JEL-codes: J51 J65 (search for similar items in EconPapers)
Date: 2005
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Handle: RePEc:fep:journl:v:18:y:2005:i:1:p:3-15