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

  • Ludsteck, Johannes
  • Haupt, Harry

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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File URL: http://epub.ub.uni-muenchen.de/1977/1/Concertina.pdf
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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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  1. 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.
  2. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  3. Fitzenberger, Bernd & Osikominu, Aderonke & Völter, Robert, 2005. "Imputation Rules to Improve the Education Variable in the IAB Employment Subsample," ZEW Discussion Papers 05-10, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Powell, James L., 1986. "Censored regression quantiles," Journal of Econometrics, Elsevier, vol. 32(1), pages 143-155, June.
  5. Koenker, Roger, 2004. "Quantile regression for longitudinal data," Journal of Multivariate Analysis, Elsevier, vol. 91(1), pages 74-89, October.
  6. Ammermüller, 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).
  7. Paul J. Devereux, 2000. "Task assignment over the business cycle," Open Access publications 10197/313, School of Economics, University College Dublin.
  8. Ekkehart Schlicht, 2005. "Hiring Standards And Labour Market Clearing," Metroeconomica, Wiley Blackwell, vol. 56(2), pages 263-279, 05.
  9. 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.
  10. 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(2), pages 343-410.
  11. David Card, 1995. "The Wage Curve: A Review," Working Papers 722, Princeton University, Department of Economics, Industrial Relations Section..
  12. 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.
  13. David G. Blanchflower & Andrew J. Oswald, 2005. "The Wage Curve Reloaded," NBER Working Papers 11338, National Bureau of Economic Research, Inc.
  14. 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.
  15. 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.
  16. Powell, James L., 1984. "Least absolute deviations estimation for the censored regression model," Journal of Econometrics, Elsevier, vol. 25(3), pages 303-325, July.
  17. repec:rus:hseeco:318796 is not listed on IDEAS
  18. Paul J . Devereux, 2002. "Occupational Upgrading and the Business Cycle," LABOUR, CEIS, vol. 16(3), pages 423-452, 09.
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