Tax-benefits policies jointly run by the social partners. Labour market implications of the bipartite sectoral funds.

This paper focuses on the employment effects of tax-benefit policies implemented by Bipartite Sectoral Funds (BSFs), institutions established by workers’ unions and employers’ organisations, and conducts a preliminary theoretical analysis of their implications for employment based on a model of wage bargaining which includes the basic elements of a tax-benefit policy and allows for the internalization of benefits. The intuition is that the peculiar institutional profile of BSFs may favour the internalization of social benefits by the unions. If this actually occurs, it can be expected that the costs of the benefits will be shared between the employers and the workers. However the exact institutional profile of the funds crucially affects the degree of internalization. It is argued that this may actually occur provided that the exchange between wage and benefits is actually feasible in the context of current industrial relations, the workers attach a sufficiently high value to the benefits, and BSFs are autonomous from government interference.