Equilibrium Earning Premium and Pension Schemes: The Long-Run Macroeconomic Effects of the Union

32 Pages Posted: 18 Aug 2012

See all articles by Bruno Chiarini

Bruno Chiarini

University of Naples, Parthenope

Paolo Piselli

Bank of Italy

Date Written: July 2012

Abstract

Using the theoretical framework based on the monopoly union model described in Kidd and Oswald (1987) and Jones (1987), this paper provides an explicit framework to assess the role of wage moderation in Italy in the last twenty years. There are two crucial ingredients to the model: the composition of union membership and the pension system. We show that the increase in pensioner's membership in the presence of a pay-as-you-go (PAYG) pension scheme has led unions to moderate wage claims. However, this result is reversed when we shift from a PAYG system to a fully-funded (FF) regime (recently adopted in Italy): in this case, the model predicts a rise in wages with respect to the standard model, regardless of the share of pensioners in the membership.

Keywords: union membership, pensioners, wage-pension trade-off

JEL Classification: J11, J51

Suggested Citation

Chiarini, Bruno and Piselli, Paolo, Equilibrium Earning Premium and Pension Schemes: The Long-Run Macroeconomic Effects of the Union (July 2012). Available at SSRN: https://ssrn.com/abstract=2131284 or http://dx.doi.org/10.2139/ssrn.2131284

Bruno Chiarini (Contact Author)

University of Naples, Parthenope ( email )

Via Generale Parisi 13
Napoli, 80133
Italy

Paolo Piselli

Bank of Italy ( email )

Via Milano, 64
00184 Rome
Italy

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