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Wages and Worker Displacement in Germany

Author

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  • M. Burda
  • A. Mertens

Abstract

This paper investigates the effect of displacement on wages of socially insured German workers, who became unemployed in 1986. Because detailed information on job loss is unavailable, displacement status is predicted using a probit, estimated on the German Socioeconomic Panel. In contrast to US findings, post-displacement wages decline only slightly upon re-employment. The lowest earnings quartile, in which displacement is concentrated, even gains slightly (2%), while wage growth losses for the upper three quartiles are higher (17%). Limited wage adjustment of displaced workers is likely to play an important role in explaining aggregate wage rigidity in Germany.
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Suggested Citation

  • M. Burda & A. Mertens, 1998. "Wages and Worker Displacement in Germany," SFB 373 Discussion Papers 1998,24, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
  • Handle: RePEc:zbw:sfb373:199824
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    Cited by:

    1. Huttunen, Kristiina & Moen, Jarle & Salvanes, Kjell G., 2006. "How Destructive Is Creative Destruction? The Costs of Worker Displacement," IZA Discussion Papers 2316, Institute for the Study of Labor (IZA).
    2. Jennifer Hunt, 2001. "Post-Unification Wage Growth in East Germany," The Review of Economics and Statistics, MIT Press, vol. 83(1), pages 190-195, February.
    3. John Hassler & José V. Rodríguez Mora & Kjetil Storesletten & Fabrizio Zilibotti, 1998. "Equilibrium unemployment insurance," Economics Working Papers 605, Department of Economics and Business, Universitat Pompeu Fabra, revised Jun 1999.
    4. Erlinghagen, Marcel, 2006. "Erstarrung, Beschleunigung oder Polarisierung? Arbeitsmarktmobilität und Beschäftigungsstabilität im Zeitverlauf. Neue Ergebnisse mit der IAB-Beschäftigtenstichprobe," Graue Reihe des Instituts Arbeit und Technik 2006-01, Institut Arbeit und Technik (IAT), Westfälische Hochschule, University of Applied Sciences.
    5. Marcel Erlinghagen, 2004. "Gewinnen arbeitgeberseitige Entlassungen an Bedeutung?: Zur Entwicklung der Beschäftigungssicherheit auf dem deutschen Arbeitsmarkt," Discussion Papers of DIW Berlin 459, DIW Berlin, German Institute for Economic Research.
    6. Eriksson, Stefan & Gottfries, Nils, 2005. "Ranking of job applicants, on-the-job search, and persistent unemployment," Labour Economics, Elsevier, vol. 12(3), pages 407-428, June.

    More about this item

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings

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