Earnings-Related Unemployment Benefits in a Unionised Economy

33 Pages Posted: 10 Mar 2003

See all articles by Laszlo Goerke

Laszlo Goerke

University of Trier - Institute of Labour Law and Industrial Relations in the European Union; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Jakob B. Madsen

University of Copenhagen - Department of Economics

Date Written: January 2003

Abstract

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

Goerke, Laszlo and Madsen, Jakob Bruechner, Earnings-Related Unemployment Benefits in a Unionised Economy (January 2003). Available at SSRN: https://ssrn.com/abstract=383100

Laszlo Goerke (Contact Author)

University of Trier - Institute of Labour Law and Industrial Relations in the European Union ( email )

Behringstraße 21, 7. Floor, Building H
Trier, 54296
Germany

HOME PAGE: http://www.iaaeu.de/

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Jakob Bruechner Madsen

University of Copenhagen - Department of Economics ( email )

Øster Farimagsgade 5
Bygning 26
1353 Copenhagen K.
Denmark

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