Pekka Sinko

Subsidizing versus Experience Rating of Unemployment Insurance in Unionized Labor Markets

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FinanzArchiv (FA)

Jahrgang 60 () / Heft 2, S. 186-204 (19)

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Alternative ways to organize government subsidies to unemployment insurance (UI) are analyzed in a right-to-manage model where industry-level unions run UI funds of their own. It is shown that equilibrium unemployment is decreasing in the share of UI financed by the employed union members. A reduction in the proportional subsidies matched by an increase in the lump-sum grant is shown to bring about wage moderation and improve employment. If labor-market parties can influence the level of benefits, a subsidy scheme with fixed assistance per unemployed is preferable to one covering a fixed share of the total UI costs.

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