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WP 13 Flexicurity, wage dynamics and inequality over the life-cycle

Author

Listed:
  • Paul Bingley
  • Lorenzo Cappellari
  • Niels WestergÃ¥rd-Nielsen

Abstract

We investigate the relationship between life-cycle wages and flexicurity in Denmark. We separate permanent from transitory wages and characterise flexicurity using membership of unemployment insurance funds. We find that flexicurity is associated with lower wage growth heterogeneity over the life-cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance membership, robustness checks suggest that moral hazard is the relevant interpretation.

Suggested Citation

  • Paul Bingley & Lorenzo Cappellari & Niels WestergÃ¥rd-Nielsen, 2012. "WP 13 Flexicurity, wage dynamics and inequality over the life-cycle," Working Papers 13, Department of the Treasury, Ministry of the Economy and of Finance.
    • Handle: RePEc:itt:wpaper:2012-13
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    File URL: http://www.dt.tesoro.it/export/sites/sitodt/modules/documenti_it/analisi_progammazione/working_papers/WP_N_13.pdf
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    More about this item

    Keywords

    Unemployment insurance; wage dynamics; wage inequality; wage instability.;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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