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

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  • Ludsteck, Johannes
  • Haupt, Harry

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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Bibliographic Info

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

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References

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  1. 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.
  2. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June.
  3. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  4. 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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  6. David Card, 1995. "The Wage Curve: A Review," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 285-299, June.
  7. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
  8. Simon C. Parker, 1999. "Income Inequality and the Business Cycle: A Survey of the Evidence and Some New Results," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 21(2), pages 201-225, January.
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  10. Ammermueller, Andreas & Lucifora, Claudio & Origo, Federica & Zwick, Thomas, 2007. "Still Searching for the Wage Curve: Evidence from Germany and Italy," IZA Discussion Papers 2674, Institute for the Study of Labor (IZA).
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  14. Devereux, Paul J, 2000. "Task Assignment over the Business Cycle," Journal of Labor Economics, University of Chicago Press, vol. 18(1), pages 98-124, January.
  15. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July.
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  17. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
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Cited by:
  1. Büttner, Thomas & Jacobebbinghaus, Peter & Ludsteck, Johannes, 2009. "Occupational upgrading and the business cycle in West Germany," Economics Discussion Papers 2009-34, Kiel Institute for the World Economy.
  2. Schlicht, Ekkehart, 2007. "Wage Dispersion and Overqualification as Entailed by Reder Competition," Discussion Papers in Economics 1976, University of Munich, Department of Economics.

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