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Wages and Worker Displacement in Germany

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  • Burda, Michael C
  • Mertens, Antje

Abstract

This paper investigates the effect of displacement on wages of socially insured German workers, who became unemployed in 1986. Because detailed information on job loss is unavailable, displacement status is predicted using a probit, estimated on the German Socioeconomic Panel. In contrast to US findings, post-displacement wages decline only slightly upon re-employment. The lowest earnings quartile, in which displacement is concentrated, even gains slightly (2%), while wage growth losses for the upper three quartiles are higher (17%). Limited wage adjustment of displaced workers is likely to play an important role in explaining aggregate wage rigidity in Germany.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1869.

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Date of creation: Apr 1998
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Handle: RePEc:cpr:ceprdp:1869

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Related research

Keywords: Displaced Workers; Tenure; Wage Determination; Wage Rigidity;

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Cited by:
  1. Eriksson, Stefan & Gottfries, Nils, 2000. "Ranking of Job Applicants, On-the-job Search and Persistent Unemployment," Working Paper Series 2000:3, Uppsala University, Department of Economics.
  2. Hunt, Jennifer, 1999. "Post-Unification Wage Growth in East Germany," CEPR Discussion Papers 2106, C.E.P.R. Discussion Papers.
  3. Hassler, John & Mora, José & Storesletten, Kjetil & Zilibotti, Fabrizio, 1999. "Equilibrium Unemployment Insurance," Seminar Papers 665, Stockholm University, Institute for International Economic Studies.
  4. Marcel Erlinghagen, 2004. "Gewinnen arbeitgeberseitige Entlassungen an Bedeutung?: Zur Entwicklung der Beschäftigungssicherheit auf dem deutschen Arbeitsmarkt," Discussion Papers of DIW Berlin 459, DIW Berlin, German Institute for Economic Research.
  5. Huttunen, Kristiina & Moen, Jarle & Salvanes, Kjell G., 2006. "How Destructive Is Creative Destruction? The Costs of Worker Displacement," IZA Discussion Papers 2316, Institute for the Study of Labor (IZA).

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