Advanced Search
MyIDEAS: Login to save this paper or follow this series

Do Firms ProvideWage Insurance Against Shocks? – Evidence from Hungary

Contents:

Author Info

  • Gábor Kátay

    ()
    (Magyar Nemzeti Bank)

Abstract

In this paper I address the question to what extent wages are affected by product market uncertainty. Implicit contract models imply that it is Pareto optimal for risk neutral firms to provide insurance to risk averse workers against shocks. Using matched employer-employee dataset, I adopted the estimation strategy proposed by Guiso et al. (2005) to evaluate wage responses to both permanent and transitory shocks in Hungary and compared my results to similar studies on Italian and Portuguese datasets. I found that firms do insure workers against product market uncertainties, but the magnitude of the wage response differs depending on the nature of the shock. Broadly speaking, the wage response to permanent shocks is twice as high as the response to transitory shocks. Comparing my results to the two other studies, the main difference lies in the elasticity of wages to transitory shocks. Unlike these previous findings, my results show that full insurance to transitory shocks is rejected.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://english.mnb.hu/Root/Dokumentumtar/ENMNB/Kiadvanyok/mnben_mnbfuzetek/WP_2008_8.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Magyar Nemzeti Bank (the central bank of Hungary) in its series MNB Working Papers with number 2008/8.

as in new window
Length: 28 pages
Date of creation: 2008
Date of revision:
Handle: RePEc:mnb:wpaper:2008/8

Contact details of provider:
Web page: http://www.mnb.hu/
More information through EDIRC

Related research

Keywords: product market uncertainty; risk sharing; wage insurance; optimal wage contract; matched employer-employee data.;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

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.:
as in new window
  1. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2005. "Insurance within the Firm," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1054-1087, October.
  2. Cardoso, Ana Rute & Portela, Miguel, 2005. "The Provision of Wage Insurance by the Firm: Evidence from a Longitudinal Matched Employer-Employee Dataset," IZA Discussion Papers 1865, Institute for the Study of Labor (IZA).
  3. Beaudry, Paul & DiNardo, John, 1991. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from Micro Data," Journal of Political Economy, University of Chicago Press, vol. 99(4), pages 665-88, August.
  4. Costas Meghir & Luigi Pistaferri, 2004. "Income Variance Dynamics and Heterogeneity," Econometrica, Econometric Society, vol. 72(1), pages 1-32, 01.
  5. Paul J. Devereux, 2005. "Do Employers Provide Insurance against Low Frequency Shocks? Industry Employment and Industry Wages," Journal of Labor Economics, University of Chicago Press, vol. 23(2), pages 313-340, April.
  6. Milton Harris & Bengt Holmstrom, 1981. "A Theory of Wage Dynamics," Discussion Papers 488, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  7. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Wiley Blackwell, vol. 70(2), pages 317-341, 04.
  8. Holmstrom, Bengt, 1981. "Contractual Models of the Labor Market," American Economic Review, American Economic Association, vol. 71(2), pages 308-13, May.
  9. Darren Grant, 2003. "The effect of implicit contracts on the movement of wages over the business cycle: Evidence from the national longitudinal surveys," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(3), pages 393-408, April.
  10. Gamber, Edward N, 1988. "Long-term Risk-Sharing Wage Contracts in an Economy Subject to Permanent and Temporary Shocks," Journal of Labor Economics, University of Chicago Press, vol. 6(1), pages 83-99, January.
  11. Weiss, Yoram, 1984. "Wage Contracts When Output Grows Stochastically: The Roles of Mobility Costs and Capital Market Imperfections," Journal of Labor Economics, University of Chicago Press, vol. 2(2), pages 155-73, April.
  12. Ichino, Andrea, 1994. "Flexible labor compensation, risk sharing and company leverage," European Economic Review, Elsevier, vol. 38(7), pages 1411-1421, August.
  13. Pissarides, Christopher A, 1985. "Short-run Equilibrium Dynamics of Unemployment Vacancies, and Real Wages," American Economic Review, American Economic Association, vol. 75(4), pages 676-90, September.
  14. Marianne Bertrand & Esther Duflo & Sendhil Mullainathan, 2004. "How Much Should We Trust Differences-in-Differences Estimates?," The Quarterly Journal of Economics, MIT Press, vol. 119(1), pages 249-275, February.
  15. Gábor Kátay & Zoltán Wolf, 2004. "Investment Behavior, User Cost and Monetary Policy Transmission - the Case of Hungary," MNB Working Papers 2004/12, Magyar Nemzeti Bank (the central bank of Hungary).
  16. Gordon, Donald F, 1974. "A Neo-Classical Theory of Keynesian Unemployment," Economic Inquiry, Western Economic Association International, vol. 12(4), pages 431-59, December.
  17. Gábor Kátay & Zoltán Wolf, 2008. "Driving Factors of Growth in Hungary - a Decomposition Exercise," MNB Working Papers 2008/6, Magyar Nemzeti Bank (the central bank of Hungary).
  18. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Bjuggren, Carl Magnus, 2014. "Sensitivity to Shocks and Implicit Employment Protection in Family Firms," Working Paper Series 1028, Research Institute of Industrial Economics.
  2. Kátay, Gábor, 2011. "Downward wage rigidity in Hungary," Working Paper Series 1372, European Central Bank.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:mnb:wpaper:2008/8. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maja Bajcsy).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.