Subsidizing versus Experience Rating of Unemployment Insurance in Unionized Labor Markets

Pekka Sinko

FinanzArchiv: Public Finance Analysis, 2004, vol. 60, issue 2, 186-204

Abstract: Alternative ways to organize government subsidies to unemployment insurance (UI) are analyzed in a right-to-manage model where industry-level unions run UI funds of their own. It is shown that equilibrium unemployment is decreasing in the share of UI financed by the employed union members. A reduction in the proportional subsidies matched by an increase in the lump-sum grant is shown to bring about wage moderation and improve employment. If labor-market parties can influence the level of benefits, a subsidy scheme with fixed assistance per unemployed is preferable to one covering a fixed share of the total UI costs.

Keywords: unemployment insurance; wage formation; experience rating (search for similar items in EconPapers)
JEL-codes: H2 J51 J65 (search for similar items in EconPapers)
Date: 2004
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Citations: View citations in EconPapers (6)

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