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

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  • Luiz A. Esteves

    ()
    (Universidade Federal do Paraná and Università di Siena)

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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Bibliographic 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
Date of revision:
Handle: RePEc:fup:wpaper:0077

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

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  1. Carneiro, Anabela & Portugal, Pedro, 2010. "Wages and the risk of displacement," Working Paper Series 1159, European Central Bank.
  2. Dunne, T. & Roberts, M.J., 1990. "Wages And The Risk Of Plant Closing," Papers 6-90-2, Pennsylvania State - Department of Economics.
  3. Omar M. G. Keshk, 2003. "CDSIMEQ: A program to implement two-stage probit least squares," Stata Journal, StataCorp LP, vol. 3(2), pages 157-167, June.
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