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Risk Sharing in Labour Markets

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Author Info

  • Arne Bigsten

    (G�teborg University)

  • Paul Collier

    (University of Oxford)

  • Stefan Dercon

    (University of Oxford)

  • Marcel Fafchamps

    (University of Oxford)

  • Jan Willem Gunning

    ()
    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Abena Oduro

    (Center for Policy Analysis, Accra, Ghana)

  • Remco Oostendorp

    ()
    (Faculty of Economics and Business Administration, Vrije Universiteit Amsterdam)

  • Cathy Pattillo

    (International Monetary Fund, Washington)

  • Mans Söderbom

    (University of Oxford)

  • Francis Teal

    (University of Oxford)

  • Albert Zeufack

    (World Bank, Washington)

Abstract

Empirical work in labour economics has focused on rent sharing as an explanation for the observed correlation in cross-sections 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, however, 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.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 03-077/2.

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Date of creation: 29 Sep 2003
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Handle: RePEc:dgr:uvatin:20030077

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Web page: http://www.tinbergen.nl

Related research

Keywords: Risk sharing; labor markets; rent sharing; insurance;

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Cited by:
  1. Marcel Fafchamps & Mans Söderbom & Najy Benhassine, 2009. "Wage Gaps and Job Sorting in African Manufacturing," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 18(5), pages 824-868, November.
  2. Pedro S. Martins & Luiz Alberto Esteves, 2006. "Is There Rent Sharing In Developing Countries? Matched-Panel Evidence From Brazil," Anais do XXXIV Encontro Nacional de Economia [Proceedings of the 34th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of G 158, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  3. Lokshin, Michael & Gimpelson, Vladimir & Oshchepkov, Aleksey, 2012. "Explaining the Dynamics in Perceptions of Job Insecurity in Russia," IZA Discussion Papers 6422, Institute for the Study of Labor (IZA).
  4. Guimbert, Stephane & Oostendorp, Remco, 2012. "Weathering the storm : responses by Cambodian firms to the global financial crisis," Policy Research Working Paper Series 6220, The World Bank.
  5. Michela Limardi, 2011. "The Ambiguous Outcome of NGOs’ Activism in Developing Countries," ERSA conference papers ersa11p555, European Regional Science Association.
  6. Marcel Fafchamps & Måns Söderbom, 2004. "Wages and Labor Management in African Manufacturing," Development and Comp Systems 0409043, EconWPA.
  7. Jellal, Mohamed & Zenou, Yves, 2006. "Ethnic diversity market structure and risk sharing in developing countries," MPRA Paper 38435, University Library of Munich, Germany.
  8. Gimpelson, V. & Kapeliushnikov, R. & Lukyanova, A. & Ryzhikova, Z. & Kulyaeva, G., 2010. "Ownership and Wage Differentiation in Russia," Journal of the New Economic Association, New Economic Association, New Economic Association, issue 5, pages 48-72.
  9. Lionel Fontagné & Michela Limardi, 2011. "The Outcome of NGOs' Activism in Developing Countries under Visibility Constraint," PSE Working Papers halshs-00630096, HAL.

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