TY - JOUR
T1 - Unions, firing costs, and unemployment
AU - Modesto, Leonor
N1 - Copyright:
Copyright 2008 Elsevier B.V., All rights reserved.
PY - 2008
Y1 - 2008
N2 - We study the effects of firing costs in unionized economies with heterogeneous workers. We consider an overlapping generations model where workers participate in the labour market both when young and when old. All workers belong to the same union that sets wages unilaterally. We find that at given wages firing costs increase youth unemployment and decrease old-age unemployment. However, once the wage response is considered, firing costs increase both youth and old-age unemployment. Indeed, knowing that when firing costs are higher firms refrain from firing, the union increases the wage of old workers, and, therefore, old-age unemployment increases.
AB - We study the effects of firing costs in unionized economies with heterogeneous workers. We consider an overlapping generations model where workers participate in the labour market both when young and when old. All workers belong to the same union that sets wages unilaterally. We find that at given wages firing costs increase youth unemployment and decrease old-age unemployment. However, once the wage response is considered, firing costs increase both youth and old-age unemployment. Indeed, knowing that when firing costs are higher firms refrain from firing, the union increases the wage of old workers, and, therefore, old-age unemployment increases.
UR - http://www.scopus.com/inward/record.url?scp=50649112816&partnerID=8YFLogxK
U2 - 10.1111/j.1467-9914.2008.00424.x
DO - 10.1111/j.1467-9914.2008.00424.x
M3 - Article
AN - SCOPUS:50649112816
SN - 1121-7081
VL - 22
SP - 509
EP - 546
JO - Labour
JF - Labour
IS - 3
ER -