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Risk of Firm Closure and Wages in Brazil: Compensating Wage Di erentials or Bargaining Concessions?

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Author Info
Luiz A. Esteves () (Universidade Federal do Paraná and Università di Siena)

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Abstract

The economic theory proposes two hypotheses for the relationship between wages and risk of job loss due to rm (or plant) closure. The rst hypothesis posits that workers at greater risk should be compensated by higher wages. This is known as the theory of compensating wage diferentials. The second hypothesis states that workers at rms with a greater risk of closure would be willing to exchange higher wages for longer-term stability in the job. This is known as the theory of bargaining concessions. There is a paucity of empirical studies on this issue, and the results have been inconsistent. The aim of this paper is to provide evidence for the Brazilian manufacturing industry. To accomplish that, diferent risk measures, diferent databases, and di erent econometric methods are used. All the tests performed in this study con rm the theory of compensating wage diferentials.

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Publisher Info
Paper provided by Universidade Federal do Paraná, Department of Economics in its series Working Papers with number 0077.

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Length: 23 pages
Date of creation: 2008
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Handle: RePEc:fup:wpaper:0077

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Related research
Keywords: exit; bankruptcy; severance payments; insolvency; wage determination;

Find related papers by JEL classification:
C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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This page was last updated on 2009-12-3.

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