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Which workers get insurance within the firm?

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  • Lagakos, David
  • Ordoñez, Guillermo L.

Abstract

Industry-level time series data suggest that low-skilled workers get less insurance within the firm than high-skilled workers. In particular, wages respond relatively more to productivity shocks in low-skilled industries than high-skilled industries. Our theory is that low-skilled workers get relatively less insurance from their firms because they have relatively lower displacement costs. Under limited commitment, lower displacement costs make the workers' outside options more attractive, and hence decrease the amount of risk sharing sustainable within the firm. Evidence on average displacement costs by industry support the theory's predictions.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Monetary Economics.

Volume (Year): 58 (2011)
Issue (Month): 6 ()
Pages: 632-645

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Handle: RePEc:eee:moneco:v:58:y:2011:i:6:p:632-645

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Web page: http://www.elsevier.com/locate/inca/505566

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References

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Cited by:
  1. Philip Jung & Moritz Kuhn, 2013. "Wage dynamics in long-term contracts," 2013 Meeting Papers 556, Society for Economic Dynamics.

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