() and Åsa Johansson
Lars Calmfors: Institute for International Economic Studies, Stockholm University, Postal: Stockholm University, S-106 69 Stockholm, Sweden
Åsa Johansson: OECD
Abstract: We show in a union-bargaining model that a decrease in the unemployment benefit level increases not only equilibrium employment, but also nominal wage flexibility, and thus reduces employment variations in the case of nominal shocks. Long-term wage contracts lead to higher expected real wages and hence higher expected unemployment than short-term contracts. Therefore lower benefits reduce the expected utility gross of contract costs of a union member more with long-term than with short-term contracts and thus create an incentive for shorter contracts. Incentives for employers work in the same direction. Lower taxes associated with lower benefits also tend to make short-term contracts more attractive.
43 pages, May 15, 2001
Full text files
Questions (including download problems) about the papers in this series should be directed to Hanna Christiansson ()
Report other problems with accessing this service to Sune Karlsson ().
This page generated on 2018-01-23 23:33:58.