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Wage insurance within German firms: do institutions matter?

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  • Guertzgen, Nicole

Abstract

Using a large linked employer-employee data set, this paper studies the extent to which 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 proposed by Guiso et al. (2005), it is shown that wage insurance is particularly apparent for individuals subject to collective wage agreements. While collective contracts alone are sufficient to fully insure workers against transitory shocks in small plants, they provide only partial insurance in medium-sized and large plants. At large employers, the joint existence of collective contracts and works councils helps to provide full insurance against transitory shocks, but provides only partial insurance against permanent shocks. This finding is consistent with the amount of insurance against permanent shocks being constrained by the possibility of considerable job losses and bankruptcy.

Suggested Citation

  • Guertzgen, Nicole, 2009. "Wage insurance within German firms: do institutions matter?," ZEW Discussion Papers 09-043, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  • Handle: RePEc:zbw:zewdip:09043
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    Cited by:

    1. Andrew Ellul & Marco Pagano & Fabiano Schivardi, 2014. "Employment and Wage Insurance within Firms - Worldwide Evidence," EIEF Working Papers Series 1402, Einaudi Institute for Economics and Finance (EIEF), revised Sep 2017.
    2. Fagereng, Andreas & Guiso, Luigi & Pistaferri, Luigi, 2016. "Back to background risk?," CEPR Discussion Papers 11051, C.E.P.R. Discussion Papers.
    3. repec:ucp:jlabec:doi:10.1086/694167 is not listed on IDEAS
    4. Chinhui Juhn & Kristin McCue & Holly Monti & Brooks Pierce, 2015. "Firm Performance and the Volatility of Worker Earnings," NBER Chapters,in: Firms and the Distribution of Income: The Roles of Productivity and Luck National Bureau of Economic Research, Inc.
    5. Andreas Fagereng & Luigi Guiso & Luigi Pistaferri, 2016. "Portfolio Choices, Firm Shocks and Uninsurable Wage Risk," NBER Working Papers 22883, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Wage insurance; linked employer-employee data; collective bargaining;

    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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