Pensions and Insider-Outsider Unemployment

Sven Schreiber

Journal of Institutional and Theoretical Economics (JITE), 2005, vol. 161, issue 4, 708-728

Abstract: If workers gain an insider position through past activity, young workers will bear the resulting outsider unemployment burden. In a world where productivity of employed workers rises because of learning-by-doing, and where labor demand is sufficiently elastic, preventing this unemployment (by lowering wages) leads to a higher income tax base in the future. Thus the institution of certain intergenerational transfer schemes provides an incentive for insiders to lower wages. In a stylized overlapping-generations model I show that this effect partially or fully abolishes unemployment in the steady-state equilibria.

JEL-codes: H55 J51 J64 (search for similar items in EconPapers)
Date: 2005
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