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Downward Wage Rigidity and Job Mobility

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Author Info
Cornelissen, Thomas
Huebler, Oloaf

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Abstract

Using data from the German Socio-Economic Panel (GSOEP) we study whether being individually affected by downward wage rigidity has an effect on layoffs, quits and intra-firm mobility. Within a structural empirical model we estimate the individual extent of wage rigidity. This is expressed by the wage sweep-up, which measures by how much individual wage growth increases through the effect of downward wage rigidity when compared to a counterfactual labour market with flexible wage setting. We find robust negative effects of wage sweep-up on quits and layoffs and some evidence for a positive association of wage sweep-up and promotion opportunities. This is consistent with a core-periphery view of the labour force, where a core work force is protected from layoffs and wage cuts and at the same time enjoys good promotion opportunities. On the other side a peripheral work force provides a buffer for adjustment and suffers from both flexible wages, more insecure jobs and less internal promotion opportunities.

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Publisher Info
Paper provided by Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover with number dp-349.

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Length: 26 pages
Date of creation: Oct 2006
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Handle: RePEc:han:dpaper:dp-349

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Related research
Keywords: wage rigidity; wage sweep-up; quits; layoffs; promotions;

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Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers iewwp040, Institute for Empirical Research in Economics - IEW. [Downloadable!]
    Other versions:
  2. Magda Kandil, 2005. "Countercyclical or procyclical real wages? A disaggregate explanation of aggregate asymmetry," Empirical Economics, Springer, vol. 30(3), pages 619-642, October. [Downloadable!] (restricted)
  3. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November. [Downloadable!] (restricted)
  4. Assar Lindbeck & Dennis J. Snower, 2001. "Insiders versus Outsiders," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 165-188, Winter. [Downloadable!] (restricted)
  5. Bauer, Thomas & Bonin, Holger & Sunde, Uwe, 2003. "Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Micro Data," IZA Discussion Papers 959, Institute for the Study of Labor (IZA). [Downloadable!]
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  6. Jean-Pierre Danthine & Andre Kurmann, 2004. "Fair Wages in a New Keynesian Model of the Business Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 7(1), pages 107-142, January. [Downloadable!] (restricted)
    Other versions:
  7. Thanasis Stengos & Louis N. Christofides, 2002. "The symmetry of the wage-change distribution: Survey and contract data," Empirical Economics, Springer, vol. 27(4), pages 705-723. [Downloadable!] (restricted)
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Cited by:
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  1. Radowski, Daniel & Bonin, Holger, 2008. "Sectoral differences in wage freezes and wage cuts: evidence from a new firm survey," Discussion Paper Series 1: Economic Studies 2008,24, Deutsche Bundesbank, Research Centre. [Downloadable!]
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