Arne Bigsten Paul Collier Stefan Dercon Marcel Fafchamps Bernard Gauthier Jan Willem Gunning Abena Oduro Remco Oostendorp Cathy Pattillo Mans S–derbom Francis Teal Albert Zeufack
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Empirical work in labor economics has focused on rent sharing as an explanation for the observed correlation between wages and profitability. The alternative explanation of risk sharing between workers and employers has not been tested. Using a unique panel data set for four African countries, we find strong evidence of risk sharing. Workers in effect offer insurance to employers: when firms are hit by temporary shocks, the effect on profits is cushioned by risk sharing with workers. Rent sharing is a symptom of an inefficient labor market. Risk sharing, by contrast, can be seen as an efficient response to missing markets. Our evidence suggests that risk sharing accounts for a substantial part of the observed effect of shocks on wages. Copyright 2003, Oxford University Press.
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Volume (Year): 17 (2003) Issue (Month): 3 (December) Pages: 349-366 Download reference. The following formats are available: HTML
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Paper
Arne Bigsten & Paul Collier & Stefan Dercon & Marcel Fafchamps & Jan Willem Gunning & Abena Oduro & Remco Oostendorp & Cathy Pattillo & Mans Söderbom & Francis Teal & Albert Zeufack, 2003.
"Risk Sharing in Labour Markets,"
Tinbergen Institute Discussion Papers
03-077/2, Tinbergen Institute.
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