Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 13-2000: IS UNEMPLOYMENT ALWAYS HIGHER WHEN INSIDERS DECIDE?

Trine Filges and Birthe Larsen
Additional contact information
Trine Filges: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Birthe Larsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark

Abstract: This paper challenges the traditional view that unemployment is high because insiders determine the union wage. The insiders in this paper are characterized by being more efficient when they search for a job than the outsiders, implying that they experience relatively less unemployment. We assume that wages are determined by a monopoly union and further that a union leader is elected by a majority voting rule. Insiders may prefer a lower wage than outsiders, implying the possibility of lower unemployment.

Keywords: Insiders and Outsiders; Search; Unemployment

JEL-codes: J20; J50; J60

24 pages, April 1, 2000

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