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Better safe than sorry? The effects of income risk, unemployment risk and the interaction of these risks on wages

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  • Wolfgang Nagl

Abstract

We examine whether income and unemployment risks are compensated by individual wages. Using a portfolio approach we show that the marginal income risk effect on wages is always positive whereas the marginal unemployment risk effect crucially depends on the income risk. The interaction effect between both risk measures is negative. Using administrative panel data from Germany we confirm the theoretically predicted signs for both risks and their interaction effect.

Suggested Citation

  • Wolfgang Nagl, 2013. "Better safe than sorry? The effects of income risk, unemployment risk and the interaction of these risks on wages," ERSA conference papers ersa13p237, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa13p237
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    Cited by:

    1. Wolfgang Nagl, 2014. "Lohnrisiko und Altersarmut im Sozialstaat," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 54.

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    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J39 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Other

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