Arbeitspapier
Unemployment Benefits, Contract Length and Nominal Wage Flexibility
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 highter 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.
- Language
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Englisch
- Bibliographic citation
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Series: CESifo Working Paper ; No. 514
- Classification
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Wirtschaft
- Subject
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Nominal wage flexibility
contracts length
macroeconomic fluctuations
unemployment benefits
- Event
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Geistige Schöpfung
- (who)
-
Calmfors, Lars
Johansson, Åsa
- Event
-
Veröffentlichung
- (who)
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Center for Economic Studies and ifo Institute (CESifo)
- (where)
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Munich
- (when)
-
2001
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Calmfors, Lars
- Johansson, Åsa
- Center for Economic Studies and ifo Institute (CESifo)
Time of origin
- 2001
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