Unemployment insurance and union bargaining — an insider-outsider approach

A trade union is required to tax its own members to fund unemployment benefit paid to its unemployed members in an insider-outsider model of union bargaining over wages and employment. An increase in unemployment benefit imposed by the government increases employment overall but not necessarily the employment of insiders if the tax rate is exogenously fixed by the government.This paper has benefited from comments of Mick Common, Dipak Ghosh, Bob Hart, and Robin Ruffell. The comments of two anonymous referees and the advice of the Editor have greatly improved the presentation of the paper. Any remaining errors or omissions are the responsibility of the authors.     

Unemployment,insurance and smoking

Using recent state-level data from the United States, this article examines new influences on cigarette demand. In particular, we uniquely focus on the effects of unemployment and health insurance coverage on smoking. Results show that higher cigarette prices, a lack of health insurance and restrictions on smoking at home, all lead to reduced smoking. On the other hand, literacy, income, unemployment, workplace smoking restrictions, smokeless tobacco taxes and tobacco-producing states do not seem to have an appreciable impact. The magnitude of the price elasticity of demand is greater than that found in the pre-MSA era. Policy implications are discussed.     

Unemployment dispersion and the allocative efficiency of the labor market

An idea that seems to gain recurrent popularity in the economics profession is that, because of technological change, changes in consumer demand, skill mismatches, and the like, the unemployed tend to become concentrated or trapped in particular geographic areas and that for these reasons unemployment rates have grown more disparate over time. This paper examines the theoretical conditions necessary for the above argument to hold and shows that such conditions are not consistent with the notion of a competitive labor market. The paper then examines various measures of unemployment-rate dispersion in order to determine whether or not unemployment rates have indeed drifted further apart over time. The empirical evidence presented indicates unequivocally that geographic unemployment rates are neither more nor less dispersed now than they were twenty years ago. The results, therefore, suggest that the competitive view of the labor market is appropriate and that the hypothesis that unemployment rates have become more dispersed over time because of structural imperfections in the labor market should be rejected.     

Unemployment and labor force participation in the United States

This paper uses historical data from the United States to investigate the relationship between unemployment and labor force participation. Cointegration analysis supports a long-run relationship between these two variables, which leads us to question the empirical relevance of the unemployment invariance hypothesis for the United States.     

Unemployment insurance design: Inducing moving and retraining

Evidence suggests that unemployed individuals can affect their job prospects by undertaking a costly action like deciding to move or retrain. Realistically, such an opportunity only arises for some individuals and the identity of those may be unobservable ex ante. The problem of characterizing constrained optimal unemployment insurance in this case has been neglected in previous literature. We construct a model of optimal unemployment insurance where multiple incentive constraints are easily handled. The model is used to analyze the case when an incentive constraint involving moving costs must be respected in addition to the standard constraint involving costly unobservable job-search. Absent wealth effects on behavior, we derive closed-form solutions showing that when the moving/retraining incentive constraint binds, unemployment benefits should increase over the unemployment spell, with an initial period with low benefits and an increase after this period has expired.     

Taxes and female labor supply

The Economic Recovery Tax Act of 1981 and the Tax Reform Act of 1986 changed the U.S. income tax structure in a dramatic fashion. In particular, these two reforms reduced the marginal tax rates for married households. In this paper I investigate what part of the rise in labor force participation of married women between 1980 to 1990 (a rise of 13 percentage points) can be accounted by the changes in taxes. I build an heterogeneous agent model populated by married households. Households differ by age and educational attainment levels of their members and decide whether the second earner, the wife, should participate in the labor market. I select parameter values so that the model economy is consistent with the 1980 U.S. economy in terms of income tax structure, wages (skill premium and gender gap), marital sorting (who is married with whom), and female labor force participation. Using counterfactual experiments I find that 20–24 percent of the rise in married female labor force participation is accounted for by the changes in the income tax structure. Changes in wages account for 62–64 percent, and changes in marital sorting account for 14–16 percent of the rise in the participation rate of married women.     

Unemployment insurance, moral hazard, and economic growth

It is important but difficult to distinguish between desirable and undesirable effects of unemployment insurance (UI) that are observationally equivalent when designing optimal UI schemes. For example, a UI-induced rise in the wage rate caused by workers taking more time to match their skills with job vacancies is desirable. However, another view of the same observation is that UI causes permanently higher involuntary unemployment by raising the reservation wage. This paper avoids this problem by regarding the trade-off between the UI replacement rates and unemployment as an intermediate relationship that matters only as far as it impacts economic growth. An empirical analysis of UI replacement rates, unemployment rates, and growth rates using annual panel data finds UI replacement rates are associated with higher unemployment. However, no significant relationship is found between UI-related unemployment and the real growth rate of gross domestic product.An earlier version of this paper was presented at the Fiftieth International Atlantic Economic Conference, October 15–18, 2000, Charleston, South Carolina. Financial support from the Scottish Economic Society and the University of Stirling is gratefully acknowledged. The Organization for Economic Cooperation and Development generously provided access to their database on benefit entitlements and gross replacement rates. The authors are grateful to an anonymous referee for constructive comments.     

Habit persistence and the long-run labor supply

Standard macroeconomic models possess the undesirable feature that people stop working in the long run. Assuming standard parameters, the neoclassical model predicts that 2% of annual productivity growth leads to a 99% decline in the labor supply after 624 years. Yet, this contradicts the fact that labor hours per capita are relatively stable, even over a long period of time. This paper shows how internal and external habit persistence each work to stabilize the long run labor supply, independent of key parameter choices.     

Unemployment benefits and recall jobs: a split population model

We study the transitions out of unemployment of the recipients of insurance benefits, focusing on whether or not they are recalled to their previous employment. Specifically, a split population duration model (SPDM) for the recall decision by employers is compared with a standard duration model (SDM). We find significant differences between the SPDM and the SDM estimates, both with regard to their magnitude and expected sign. Some of the variables record undervalued estimated hazard rates in the SDM with respect to the SPDM.     

Asset bubbles in an overlapping generations model with endogenous labor supply

This paper examines the effects of asset bubbles in an overlapping generations model with endogenous labor supply. We show analytically that asset bubbles can lead to an expansion in steady-state capital, investment, employment and output under certain conditions.     

The anatomy of the aggregate labor supply elasticity

We show that the aggregate Frisch elasticity of labor supply can greatly exceed the corresponding individual-level parameter, and we illustrate the “anatomy” of the former in terms of intensive and extensive margins. The methodology consists of using micro data from the PSID to construct a panel of individuals and an aggregate time series obtained by aggregating these individuals each year. These two data sets represent exactly the same sample at different levels of aggregation, and we use them to identify the parameters of two distinct MaCurdy-type micro and macro equations. We find a micro elasticity of about 0.1 and a much larger macro elasticity that ranges from 1.1 to 1.7. There is no conflict between the two estimates: the micro one reflects only the intensive margin while the macro one reflects, in addition, the much more volatile extensive margin. Furthermore, aggregation of only continuously employed individuals allows us to provide a reliable estimate of the intensive margin elasticity in the range 0.3–0.4. This implies an extensive margin elasticity in the range 0.8–1.4. These findings suggest that micro evidence is not a benchmark for assessing how large the Frisch elasticity of labor supply should be in a model of the aggregate economy.     

Externality in labor supply and government spending

Standard business cycle models face difficulties generating (i) government spending multipliers exceeding unity and (ii) stabilizing effects of government size. Using a simple model with externality in labor supply, we show that a sufficient degree of complementarity between aggregate and private labor supplies is key to reproducing these stylized facts.     

Income tax policy and lifetime labor supply

A progressive income tax structure provides incentives for individuals to alter their rate of work and their age of retirement. Compared to a zero tax or proportional tax equilibrium, progressive taxation induces individuals to take less leisure in the form of retirement in exchange for more leisure during the worklife, especially at high wage levels. The imposition of a special pension tax provision on top of a progressive tax structure offsets the distortion on leisure alternatives imposed by progressivity. Indeed, the pension tax deferral provision can neutralize the impact of tax progressivity on the work profile over life. The magnitude of these tax inducements in the U.S. tax structure are non-trivial and therefore are expected to alter labor supply decisions over the lifetime. The model finds empirical support using data from the Social Security Newly Entitled Beneficiaries Survey.     

Unemployment insurance: The role of electoral systems and regional labour markets

Levels of insurance against unemployment vary considerably across countries. Replacement rates, the ratio relating income from unemployment to what people earned when they were employed, are higher in countries with proportional electoral systems than in countries with majoritarian systems. Also, replacement rates are positively correlated with per capita income and negatively correlated with the countries' unemployment rates. I develop an electoral competition model that replicates these stylized facts.     

Partial unemployment insurance benefits and the transition rate to regular work

In Finland, unemployed workers who are looking for a full-time job but take up a part-time or very short full-time job may qualify for partial unemployment benefits. In exchange for partial benefits, these applicants must continue their search of regular full-time work. This study analyzes the implications of working on partial benefits for subsequent transitions to regular employment. The timing-of-events approach is applied to distinguish between causal and selectivity effects associated with the receipt of partial benefits. The results suggest that partial unemployment associated with short full-time jobs facilitates transitions to regular employment. Also part-time working on partial benefits may help men (but not women) in finding a regular job afterwards.     

State mandated benefits and the small firm's decision to offer insurance

In the last decade, the number of Americans without health insurance has grown, partly due to an erosion in employer-based coverage among workers. This paper examines the extent to which state-mandated benefit requirements and other state insurance regulations discourage small firms in the private sector from providing health benefits. Using data on 1320 firms observed in 1985 and 492 firms observed in 1988, we estimate two models of small firms' decisions to offer health insurance (one for each data set), and then use them to assess the effects that mandates had on purchasing decisions in both years. We estimate that 19 percent of noncoverage among sample businesses in 1985 and 43 percent of noncoverage in the 1988 sample was attributable to state-mandated benefits. State continuation-of-coverage requirements were particularly burdensome for firms. With continued growth in the number of state mandated benefit requirements, we should expect a steady rise in the small firm's propensity to forgo insurance coverage.     

International portfolio diversification and endogenous labor supply choice

This paper presents a multi-country general equilibrium model driven by productivity shocks, where labor supply and consumption are chosen endogenously. We use this framework to study the effect of labor supply for optimal international diversification. We find that the model's ability to help explain home-bias depends crucially on the level of substitutability between consumption and non-working time. Quantitatively, the non-separability in the preferences helps in a nonnegligible way, but it cannot entirely explain the extreme degree of home-bias in U.S. portfolios.     

我国劳动力供求的结构性特征分析

通过以衡量劳动力供求均衡程度的求人倍率指标为主要研究对象,利用监测中心公布的劳动力供求季度变化数据考察求人倍率随经济波动的情况,从而得出结论：既然劳动人供求的结构性矛盾是由“供给”、“需求”、和“制度环境”三方面因素相互作用造成的,因此,解决矛盾的落脚点就在这三个方面。从需求的角度看,需要经济发展方式的转变,需要经济的均衡性发展;从供给的角度看,需要调整教育的发展结构,并促进职业培训的发展;从制度环境的角度则需要进一步完善劳动力市场建设。     

Endogenous gender power,household labor supply and the demographic transition

We present a microeconomic model of the household in which there exists no difference in spousal preferences but childrearing is more time costly for women. Bargaining between the wife and the husband forms the basis of household decisions. Marital bargaining power is determined according to the incomes of the spouses, which in turn help to determine their reservation utility levels outside the marriage. The endogeneity of bargaining power introduces a non-cooperative element to the couples' decision-making problem because both the husbands and the wives take into account how their pre-marital education decisions affect their marital power and the share they extract from household resources in the future. The model predicts that wives invest more than is Pareto efficient in their education in order to increase their bargaining power in marriage. As a consequence, couples have fewer children and consume more when exogenous structural changes lead women to invest more in education. A corollary of the model is that empowering women directly through social reforms such as a lower gender wage gap leads to lower fertility and higher spousal consumption and leisure.