Employment Dynamics and Redistributive Policies under Workers' Social Norms

Arbeitspapier

We study employment dynamics using an OLG model with unemployment benefits and universal old-age survival pensions, both financed by taxing employed workers. The novelty is that we explicitly introduce workers' social norms that shape both the individual participation decision of workers and wage bargaining. We find that social norms increase the likelihood of multiplicity of equilibria and somewhat facilitate the emergence of indeterminacy and flip bifurcations, constituting therefore a source of business cycles driven by self-fulfilling volatile expectations, i.e. sunspots. We also find that, in the presence of strong social norms, standard policy recommendations that advocate a decrease in unemployment benefits in order to boost employment are no longer valid. Indeed, our simulation results show that the opposite will happen for empirically plausible levels of the unemployment rate.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: IZA Discussion Papers ; No. 7888

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Business Fluctuations; Cycles ; Taxation and Subsidies: Externalities; Redistributive Effects; Environmental Taxes and Subsidies ; Fiscal Policies and Behavior of Economic Agents: Household ; Unemployment Insurance; Severance Pay; Plant Closings
• Thema: flip bifurcations ; local indeterminacy ; steady state multiplicity ; sunspots ; workers' social norms ; unemployment benefits

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Dos Santos Ferreira, Rodolphe ; Lloyd-Braga, Teresa ; Modesto, Leonor
• Ereignis: Veröffentlichung
• (wer): Institute for the Study of Labor (IZA)
• (wo): Bonn
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/89950
• Letzte Aktualisierung: 10.03.2025, 11:42 MEZ