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Unemployment Benefits, Contract Length and Nominal Wage Flexibility
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
Stockholm University, Faculty of Social Sciences, Institute for International Economic Studies.
2001 (English)Report (Other academic)
Abstract [en]

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.

Place, publisher, year, edition, pages
Stockholm: IIES , 2001. , 43 p.
Series
Seminar Paper / Institute for International Economic Studies, Stockholm University. (Online), ISSN 1653-610X
Keyword [en]
nominal wage flexibility, contract length, macroeconomic fluctuations, unemployment benefits
National Category
Economics
Identifiers
URN: urn:nbn:se:su:diva-41169OAI: oai:DiVA.org:su-41169DiVA: diva2:328757
Available from: 2010-07-07 Created: 2010-07-06 Last updated: 2016-04-08Bibliographically approved

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CiteExportLink to record
Permanent link

Direct link
Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
More styles
Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
  • sv-SE
  • Other locale
More languages
Output format
  • html
  • text
  • asciidoc
  • rtf