Subsidising Education with Unionised Labour Markets

Florian Wöhlbier ()

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: It is well known from the literature that a unionisation of labour markets leads to an increase in wages and a decrease in employment. However, in these models human capital formation is usually taken as given. This paper internalises the education decision and shows that a unionisation of the labour market for unskilled workers will also lead to an inefficiently low education level. We discuss the effects of an education subsidy. It will turn out that both the way of financing and the reaction of the trade union to tax rate changes are crucial for the employment and welfare effects.

Keywords: Human Capital; Unemployment; Subsidisation (search for similar items in EconPapers)
JEL-codes: H20 J24 J51 (search for similar items in EconPapers)
Date: 2002-03
New Economics Papers: this item is included in nep-lab
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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:7

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