Dynamic wage bargaining if benefits are tied to individual wages

Beißinger, Thomas; Egger, Hartmut

doi:10.1093/oep/gpf050

Cited by 15 publications

(16 citation statements)

References 19 publications

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“…Note that the higher the degree of monopoly power in the commodity market, 1 η , the higher is the negotiated wage in concordance with what we anticipated below (2).…”

Section: The Labor Marketsupporting

confidence: 85%

“…In equilibrium W c = w t . According to Blanchard and Katz (1999) and Beissinger and Egger (2004) we assume that the unemployment benefits are tied to the previous level of earned wages:…”

Section: General Equilibrium Analysismentioning

confidence: 99%

“…The first one is that unions are able to internalize government transfers in exchange of taxes. 2 This implies that the tax system is not forced to damage employment. For example in corporatist economies, such as the Nordic ones, taxes may be perceived as the counterpart of the welfare state.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

The tax system incidence on unemployment: A country-specific analysis for the OECD economies

García

Sala

2008

Economic Modelling

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in The Tax System Incidence on Unemployment: A Country-Specific Analysis for the OECD EconomiesJosé Ramón García Hector Sala The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. ABSTRACTThe Tax System Incidence on Unemployment: A Country-Specific Analysis for the OECD Economies * This paper provides a detailed analysis on the incidence of the tax structure on the labor market. To do so it goes beyond the traditional examination of the 'level' effect of the fiscal wedge and considers a 'composition' effect defined as a payroll tax bias (PTB): the proportion of payroll taxes paid by employees with respect to the one paid by firms. We develop a right-to-manage model encompassing different wage bargaining systems and the incidence of different type of taxes. Controlling for demand-side and supply-side determinants of unemployment, we show that the PTB plays a significant role in explaining unemployment in the continental European countries, but not in the Nordic nor the AngloSaxon ones. We also show that there is no relationship between the incidence of the PTB and unemployment persistence, even though there is a positive one with respect to the level of the fiscal wedge. JEL Classification:E24, E62

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“…Note that the higher the degree of monopoly power in the commodity market, 1 η , the higher is the negotiated wage in concordance with what we anticipated below (2).…”

Section: The Labor Marketsupporting

confidence: 85%

“…In equilibrium W c = w t . According to Blanchard and Katz (1999) and Beissinger and Egger (2004) we assume that the unemployment benefits are tied to the previous level of earned wages:…”

Section: General Equilibrium Analysismentioning

confidence: 99%

See 1 more Smart Citation

The tax system incidence on unemployment: A country-specific analysis for the OECD economies

García

Sala

2008

Economic Modelling

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“…This reference wage is typically related to the unemployment bene…t, which, in most OECD countries depends on past wages. This introduces the relationship between current and past wages (Burkhard and Morgenstern, 2000 and Beissinger and Egger, 2004). Wage inertia has also been justi…ed in e¢ ciency wage models, where the wage is set by the …rm in order to induce workers to exert the pro…t maximizing amount of e¤ort (de la Croix and Collard, 2000; Danthine and Donaldson, 1990, and Danthine and Kurmann, 2004).…”

Section: Introductionmentioning

confidence: 99%

“…of time. 4 According to King and Rebelo (1993) the neoclassical growth model requires implausibly high interest rates to explain these large growth rates. We show that taking into account labor market dynamics driven by wage inertia may explain high growth rates with plausible values of the interest rate.…”

Section: Introductionmentioning

confidence: 99%

Growth, unemployment and wage inertia

Raurich

Sorolla

2014

Journal of Macroeconomics

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Abstract:We introduce wage setting via efficiency wages in the neoclassical one-sector growth model to study the growth effects of wage inertia. We compare the dynamic equilibrium of an economy with wage inertia with the equilibrium of an economy without it. We show that wage inertia affects the long run employment rate and that the transitional dynamics of the main economic variables will be different because wages are a state variable when wage inertia is introduced. In particular, we show that the model with wage inertia can explain some growth patterns that cannot be explained when wages are flexible. We also study the growth effects of permanent technological and fiscal policy shocks in these two economies. During the transition, the growth effects of technological shocks obtained when wages exhibit inertia may be the opposite of those obtained when wages are flexible. These technological shocks may have long run effects if there is wage inertia.JEL Codes: O41.

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A positive theory of the earnings relationship of unemployment benefits

2009

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in A Positive Theory of the Earnings Relationship of Unemployment BenefitsLaszlo Goerke Markus Pannenberg Heinrich W. Ursprung The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. ABSTRACT A Positive Theory of the Earnings Relationship of Unemployment BenefitsEvidently, the benefit-structure of the unemployment insurance has a significant influence on profits and trade union utility. We show for a wage bargaining model that a stronger earnings relationship of unemployment benefits may reduce wages and increase employment. This raises the question as to how the benefit structure is determined in the political process. To answer this question, we consider a government that chooses the earnings relationship with a view to maximising its political support. Our model predicts a strong earnings relationship under right-wing governments and a weak one when the unions' influence is pronounced. Deepening international economic integration has ambiguous effects. Using panel data for 19 OECD countries from 1961 to 2003 we find support for the hypothesized domestic influences and show that the earnings relationship varies negatively with openness.JEL Classification: D72, J51, J65

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Dynamic wage bargaining if benefits are tied to individual wages

Cited by 15 publications

References 19 publications

The tax system incidence on unemployment: A country-specific analysis for the OECD economies

The tax system incidence on unemployment: A country-specific analysis for the OECD economies

Growth, unemployment and wage inertia

A positive theory of the earnings relationship of unemployment benefits

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