Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/211957 
Year of Publication: 
2003
Series/Report no.: 
Bank of Finland Discussion Papers No. 24/2003
Publisher: 
Bank of Finland, Helsinki
Abstract: 
In this paper we study the implications of the unemployment insurance (UI) financing system on wage levels and employment when labour markets are unionised and the revenues of the firms are stochastic.We use the basic monopoly union approach of wage and employment determination and assume that unemployment benefits are financed by employees UI contributions to the union s UI fund and by the government s tax revenue.The main focus of this paper is on the effects of UI buffer funding on employment fluctuations.We show that, compared with the pay-as-you-go financing system, buffer funding stabilises the economy by decreasing employment fluctuations where wages are flexible.If wages are rigid, buffer funding stabilises net wage variations, but has hardly any effect on employment fluctuations.
Subjects: 
unemployment insurance
unions
stabilisation
buffer funding
JEL: 
E61
J51
J65
Persistent Identifier of the first edition: 
ISBN: 
952-462-084-7
Document Type: 
Working Paper

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