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Wage insurance within German firms: do institutions matter?

Listed author(s):
  • Guertzgen, Nicole

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.

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Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 09-043.

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Date of creation: 2009
Handle: RePEc:zbw:zewdip:09043
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  8. Gürtzgen, Nicole, 2006. "Rent-Sharing and Collective Bargaining Coverage: Evidence from Linked Employer-Employee Data," ZEW Discussion Papers 05-90 [rev.], ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  11. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
  12. Ana Rute Cardoso & Miguel Portela, 2009. "Micro Foundations for Wage Flexibility: Wage Insurance at the Firm Level," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 29-50, 03.
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  18. Guertzgen, Nicole, 2007. "Job and Worker Reallocation in German Establishments: The Role of Employers? Wage Policies and Labour Market Institutions," ZEW Discussion Papers 07-084, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
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  21. John Van Reenen, 1996. "The Creation and Capture of Rents: Wages and Innovation in a Panel of U. K. Companies," The Quarterly Journal of Economics, Oxford University Press, vol. 111(1), pages 195-226.
  22. Kátay, Gábor, 2008. "Do firms provide wage insurance against shocks? Evidence from Hungary," Working Paper Series 0964, European Central Bank.
  23. Mahmood Arai, 2003. "Wages, Profits, and Capital Intensity: Evidence from Matched Worker-Firm Data," Journal of Labor Economics, University of Chicago Press, vol. 21(3), pages 593-618, July.
  24. Darren Grant, 2003. "The Effect of Implicit Contracts on the Movement of Wages over the Business Cycle: Evidence from the National Longitudinal Surveys," ILR Review, Cornell University, ILR School, vol. 56(3), pages 393-408, April.
  25. Alda, Holger & Bender, Stefan & Gartner, Hermann, 2005. "The linked employer-employee dataset of the IAB (LIAB)," IAB Discussion Paper 200506, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
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