Helge Sanner

Self-financing unemployment insurance and bargaining structure

This study examines how the size of trade unions relative to the labor force impacts on the desirability of different organizational forms of self-financing unemployment insurance (UI). For this purpose, we compare the outcome of a model with a uniform payroll tax to a model where workers pay taxes according to their systematic risk of unemployment. Our results highlight the importance of the bargaining structure for the assessment of a particular UI scheme. Most importantly, it depends on the relative size of the unions whether efficiency favors a uniform or a differentiated UI scheme.

Spatial Price Discrimination in Two-Dimensional Competitive Markets

Intuition suggests that firms that can apply price discrimination make higher profits than firms that are restricted in their pricing policy. In this paper, we show that, in general, this is not the case. In the framework of a two-dimensional spatial model with elastic demand a la Losch, we further investigate the interplay of transport costs, competition, and price policy. One of our results is that under realistic specifications of parameters each firm gains a monopolistic area in the center of its market that has the same shape as the entire market, but with a convexly or concavely distorted separating line, depending on the extension of the market.

Optimal Unemployment Insurance in a Federation

Unemployment insurance usually does not differentiate between groups of workers bearing different risks of unemployment. This means that workers who are characterized by a systematically low unemployment risk (involuntarily) subsidize high-risk workers. One of the most important cases is the interregional transfer of wealth through unemployment insurance within countries like Italy, Germany, or the United Kingdom, which are rather heterogeneous with respect to regional unemployment rates. The distortion of migration decisions caused by this subsidy gives rise to calls for a reform of the UI system, leading to regionally independent budgets (see e.g. WELFENS, 1998, p. 293). In short, the line of reasoning is that the reform would improve efficiency by giving an incentive to migrate into the region where labor is relatively scarce. As a result, the unemployment insurance parameters would then perfectly reflect the regional abundance of labor.