Earnings-Related Unemployment Benefits in a Unionised Economy
33 Pages Posted: 10 Mar 2003
Date Written: January 2003
We show that a stronger earnings relationship of unemployment compensation reduces wages and increases employment in an economy in which wages are determined by a trade union that maximises the rent from unionisation. The opposite result applies for a utilitarian union. Using manufacturing and non-manufacturing data for 16 OECD countries, estimates suggest that a 10% increase in the earnings relationship is associated with a 1.9% fall in manufacturing wages, a 0.6% reduction in non-manufacturing wages and a 7.3% reduction in unemployment.
Keywords: Earnings Relationship, OECD, Panel Data, Trade Union, Unemployment, Unemployment Benefits
JEL Classification: E24, J51, J65
Suggested Citation: Suggested Citation