Evidently, the benefit-structure of the unemployment insurance has a significant influence on profits and trade union utility. We show for a wage bargaining model that a stronger earnings relationship of unemployment benefits may reduce wages and increase employment. This raises the question as...

We construct a political equilibrium in which employers and labour unions bargain over labour contracts, wage-earners and profit-earners lobby the government for taxation and labour market regulation, and labour market legislation must be accepted by the majority of voters. We show that the...