Unemployment benefits as redistribution scheme of trade gains: A positive analysis

Arbeitspapier

Trade liberalization is no Pareto-improvement - there are winners (high-skilled) and losers (low-skilled). To compensate the losers the government is assumed to introduce unemployment benefits (UB). These benefits are financed by either a wage tax, a payroll tax, or a profit tax. Using a Melitz-type model of international trade with unionized labour markets and heterogeneous workers we show that: (i) UB financed by a wage tax reduce aggregate employment but increase welfare measured by per capita output. (ii) UB financed by a payroll tax reduce aggregate employment and welfare. If UB exceeds a well-defined threshold, the trade gains will be completely destroyed. (iii) UB financed by a profit tax reduce the unemployment rate of the low-skilled, but also reduces welfare. The threshold for the level of UB, where the trade gains are destroyed by the redistribution scheme, is higher compared to the case of a payroll tax.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: MAGKS Joint Discussion Paper Series in Economics ; No. 10-2012

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Trade and Labor Market Interactions
• Thema: trade liberalization ; heterogeneous firms ; trade unions ; skill-specific unemployment ; unemployment benefits ; taxes

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): de Pinto, Marco
• Ereignis: Veröffentlichung
• (wer): Philipps-University Marburg, Faculty of Business Administration and Economics
• (wo): Marburg
• (wann): 2012

Weitere Informationen

• Handle: http://hdl.handle.net/10419/56540
• Letzte Aktualisierung: 10.03.2025, 11:43 MEZ