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Downward Wage Rigidity and Job Mobility

Author

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  • Cornelissen, Thomas
  • Huebler, Oloaf

Abstract

Using data from the German Socio-Economic Panel (GSOEP) we study whether being individually affected by downward wage rigidity has an effect on layoffs, quits and intra-firm mobility. Within a structural empirical model we estimate the individual extent of wage rigidity. This is expressed by the wage sweep-up, which measures by how much individual wage growth increases through the effect of downward wage rigidity when compared to a counterfactual labour market with flexible wage setting. We find robust negative effects of wage sweep-up on quits and layoffs and some evidence for a positive association of wage sweep-up and promotion opportunities. This is consistent with a core-periphery view of the labour force, where a core work force is protected from layoffs and wage cuts and at the same time enjoys good promotion opportunities. On the other side a peripheral work force provides a buffer for adjustment and suffers from both flexible wages, more insecure jobs and less internal promotion opportunities.

Suggested Citation

  • Cornelissen, Thomas & Huebler, Oloaf, 2006. "Downward Wage Rigidity and Job Mobility," Hannover Economic Papers (HEP) dp-349, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
    • Handle: RePEc:han:dpaper:dp-349
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    Cited by:

    1. Gerlach Knut & Hübler Olaf, 2009. "Employment Adjustments on the Internal and External Labour Market – An Empirical Study with Personnel Records of a German Company," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 229(2-3), pages 198-213, April.
    2. Boris Hirsch & Thomas Zwick, 2015. "How Selective Are Real Wage Cuts? A Micro-analysis Using Linked Employer–Employee Data," LABOUR, CEIS, vol. 29(4), pages 327-347, December.
    3. Bellmann, Lutz & Cornelißen, Thomas & Hübler, Olaf & Pahnke, André, 2008. "Betriebliche Reorganisation, Entlohnung und Beschäftigungsstabilität (Organisational change, wages and job stability)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 41(2/3), pages 259-285.
    4. repec:bla:germec:v:9:y:2008:i::p:312-338 is not listed on IDEAS
    5. Stüber, Heiko & Beissinger, Thomas, 2012. "Does downward nominal wage rigidity dampen wage increases?," European Economic Review, Elsevier, vol. 56(4), pages 870-887.
    6. Puhani Patrick A., 2008. "Relative Demand and Supply of Skills and Wage Rigidity in the United States, Britain, and Western Germany," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 228(5-6), pages 573-585, October.
    7. Bellmann, Lutz & Cornelißen, Thomas & Hübler, Olaf & Pahnke, André, 2008. "Betriebliche Reorganisation, Entlohnung und Beschäftigungsstabilität (Organisational change, wages and job stability)," Zeitschrift für ArbeitsmarktForschung - Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 41(2/3), pages 259-285.
    8. Radowski, Daniel & Bonin, Holger, 2008. "Sectoral Differences in Wage Freezes and Wage Cuts: Evidence from a new Firm Survey," ZEW Discussion Papers 08-097, ZEW - Leibniz Centre for European Economic Research.

    More about this item

    Keywords

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    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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