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Employment and wage insurance within firms: worldwide evidence

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  • Ellul, Andrew
  • Pagano, Marco
  • Schivardi, Fabiano

Abstract

We investigate the determinants of firms' implicit employment and wage insurance to employees against industry-level and idiosyncratic shocks. We rely on differences between family and non-family firms to identify the supply of insurance, and between national public insurance programs to gauge workers' demand for insurance. Using firm-level data from 41 countries, we find that family firms provide greater employment protection but less wage stability. Employment protection comes at a price: family firms pay 5 percent lower wages, controlling for country, industry and time effects. The additional protection afforded by family firms is greater, and the wage discount larger, the less generous the public unemployment insurance program, indicating that firm and government employment insurance are substitutes. The cross-country evidence is broadly confirmed by Italian employee-employer matched data, which also show that in family firms the adjustment to shocks occurs mostly through the hiring margin, while separations are not responsive to shocks.

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  • Ellul, Andrew & Pagano, Marco & Schivardi, Fabiano, 2014. "Employment and wage insurance within firms: worldwide evidence," LSE Research Online Documents on Economics 119027, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:119027
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    More about this item

    Keywords

    risk-sharing; insurance; social security; unemployment; wages; family firms;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • H26 - Public Economics - - Taxation, Subsidies, and Revenue - - - Tax Evasion and Avoidance
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General

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