Dynamic Wage Bargaining If Benefits are Tied to Individual Wages

Oxford Economic Papers, Vol. 56, No. 3, pp. 437-460, 2004

Posted: 18 Feb 2012

See all articles by Thomas Beissinger

Thomas Beissinger

University of Hohenheim; IZA Institute of Labor Economics

Hartmut Egger

University of Zurich - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Multiple version iconThere are 2 versions of this paper

Date Written: July 1, 2004

Abstract

In dynamic wage bargaining models it is usually assumed that individual unemployment benefits are a fraction of the average wage level. In most countries, however, unemployment benefits are instead tied to the previous level of individually earned wages. We show how the analysis has to be modified if this fact is taken into account and compare our findings for the wage-setting curve with outcomes under other unemployment compensation schemes. From this comparison it becomes evident how the shape and position of the wage-setting curve depends on the specification of the unemployment benefit system. We also demonstrate that a reduction of unemployment benefits of those who get unemployed after the bargaining period leads to higher equilibrium unemployment.

Keywords: Dynamic wage bargaining, wage curve, unemployment benefits

JEL Classification: J51, J65, E24

Suggested Citation

Beissinger, Thomas and Egger, Hartmut, Dynamic Wage Bargaining If Benefits are Tied to Individual Wages (July 1, 2004). Oxford Economic Papers, Vol. 56, No. 3, pp. 437-460, 2004, Available at SSRN: https://ssrn.com/abstract=2007221

Thomas Beissinger (Contact Author)

University of Hohenheim ( email )

Schloss Museumsflügel
Stuttgart, 70593
Germany

HOME PAGE: http://labour.uni-hohenheim.de/

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Hartmut Egger

University of Zurich - Department of Economics ( email )

Zürichbergstrasse 14
CH-8032 Zurich
Switzerland

HOME PAGE: http://www.wwi.unizh.ch/staff/egger/index.php

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

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