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An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition

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Author Info
Ludsteck, Johannes
Haupt, Harry

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Abstract

A firm that faces insufficient supply of labor can either increase the wage offer to attract more applicants, or reduce the hiring standard to enlarge the pool of potential employees, or do both. This simultaneous adjustment of wages and hiring standards has been emphasized in a classical contribution by Reder (1955) and implies that wage reactions to employment changes can be expected to be more pronounced for low wage workers than for high wage workers. We test this hypothesis (together with a related hypothesis on firm-specific human capital) by applying a bootstrap-based quantile regression approach to censored panel data from the German employment register. Our findings suggest that market clearing is achieved by a combination of wage and hiring standards adjustment.

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Paper provided by University of Munich, Department of Economics in its series Discussion Papers in Economics with number 1977.

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Date of creation: Jul 2007
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Handle: RePEc:lmu:muenec:1977

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Related research
Keywords: wage setting; hiring standards; wage structure; efficiency wages; panel quantile regression; censoring;

Find related papers by JEL classification:
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models

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References listed on IDEAS
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  2. repec:rus:hseeco:318796 is not listed on IDEAS
  3. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Paul J. Devereux, 2002. "Occupational Upgrading and the Business Cycle," LABOUR, CEIS, Fondazione Giacomo Brodolini and Blackwell Publishing Ltd, vol. 16(3), pages 423-452, 09. [Downloadable!] (restricted)
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    Other versions:
  6. repec:fth:prinin:343 is not listed on IDEAS
  7. Ekkehart Schlicht, 2005. "Hiring Standards And Labour Market Clearing," Metroeconomica, Blackwell Publishing, vol. 56(2), pages 263-279, 05. [Downloadable!] (restricted)
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  8. Ammermueller, Andreas & Lucifora, Claudio & Origo, Federica & Zwick, Thomas, 2007. "Still searching for the wage curve : evidence from Germany and Italy," ZEW Discussion Papers 07-008, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research. [Downloadable!]
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  9. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October. [Downloadable!] (restricted)
  10. Bernd Fitzenberger & Aderonke Osikominu & Robert Völter, 2006. "Imputation Rules to Improve the Education Variable in the IAB Employment Subsample," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 126(3), pages 405-436.
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  11. Khan, Shakeeb & Powell, James L., 2001. "Two-step estimation of semiparametric censored regression models," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 73-110, July. [Downloadable!] (restricted)
  12. Robert E. Hall, 1974. "The Process of Inflation in the Labor Market," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 5(1974-2), pages 343-410. [Downloadable!]
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  14. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July. [Downloadable!] (restricted)
  15. Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the Cyclicality of Real Wages: How Important Is Composition Bias?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 1-25, February. [Downloadable!] (restricted)
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  16. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June. [Downloadable!] (restricted)
  17. Hong H. & Chernozhukov V., 2002. "Three-Step Censored Quantile Regression and Extramarital Affairs," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 872-882, September. [Downloadable!] (restricted)
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