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Wage insurance within German firms: do institutions matter?

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  • N. Guertzgen

Abstract

type="main" xml:id="rssa12019-abs-0001"> Using a large linked employer–employee data set, the paper studies the extent to which German employers insure workers against transitory and permanent firm level shocks. Particular emphasis is given to the question of whether the amount of wage insurance depends on the nature of industrial relations. Adopting the identification strategy that was introduced by Guiso and co-workers, it is shown that industry level contracts and local works councils are important insurance providers. These findings lend support to the notion that collective institutions may mitigate the enforcement problems that typically arise within risk sharing agreements. Moreover, the ability of industry level contracts to insulate workers' wages from shocks appears to decrease with plant size, whereas works councils' ability to provide insurance increases with plant size. This latter finding is consistent with works councils having, by law, more information rights at larger employers.

Suggested Citation

  • N. Guertzgen, 2014. "Wage insurance within German firms: do institutions matter?," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 177(2), pages 345-369, February.
  • Handle: RePEc:bla:jorssa:v:177:y:2014:i:2:p:345-369
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    File URL: http://hdl.handle.net/10.1111/rssa.2014.177.issue-2
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    Citations

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    Cited by:

    1. Chinhui Juhn & Kristin McCue & Holly Monti & Brooks Pierce, 2018. "Firm Performance and the Volatility of Worker Earnings," Journal of Labor Economics, University of Chicago Press, vol. 36(S1), pages 99-131.
    2. Andrew Ellul & Marco Pagano & Fabiano Schivardi, 2018. "Employment and Wage Insurance within Firms: Worldwide Evidence," Review of Financial Studies, Society for Financial Studies, vol. 31(4), pages 1298-1340.
    3. Kerndler, Martin, 2019. "Size and persistence matter: Wage and employment insurance at the micro level," ECON WPS - Vienna University of Technology Working Papers in Economic Theory and Policy 04/2019, Vienna University of Technology, Institute for Mathematical Methods in Economics, Research Group Economics (ECON).
    4. Andreas Fagereng & Luigi Guiso & Luigi Pistaferri, 2016. "Back to Background Risk," EIEF Working Papers Series 1602, Einaudi Institute for Economics and Finance (EIEF), revised Jan 2016.
    5. Yoav Friedmann, 2016. "The Information Technology Industries: Employees, Wages And Dealing With Shocks," Israel Economic Review, Bank of Israel, vol. 14(1), pages 97-132.
    6. Kraft, Kornelius, 2018. "Productivity and distribution effects of codetermination in an efficient bargaining model," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 458-485.
    7. Luigi Guiso & Luigi Pistaferri, 2020. "The insurance role of the firm," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 45(1), pages 1-23, March.
    8. Pagano, Marco, 2020. "Risk Sharing Within the Firm: A Primer," Foundations and Trends(R) in Finance, now publishers, vol. 12(2), pages 117-198, October.
    9. Andreas Fagereng & Luigi Guiso & Luigi Pistaferri, 2018. "Portfolio Choices, Firm Shocks, and Uninsurable Wage Risk," Review of Economic Studies, Oxford University Press, vol. 85(1), pages 437-474.

    More about this item

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects

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