IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

How selective are real wage cuts? A micro-analysis using linked employer-employee data

  • Hirsch, Boris
  • Zwick, Thomas

Using linked employer-employee panel data for Germany, this paper investigates whether firms implement real wage reductions in a selective manner. In line with insider-outsider and several strands of efficiency wage theory, we find strong evidence for selective wage cuts with high-productivity workers being spared even when controlling for permanent differences in firms' wage policies. In contrast to some recent contributions stressing fairness considerations, we also find that wage cuts increase wage dispersion among peers rather than narrowing it. Notably, the same selectivity pattern shows up when restricting our analysis to firms covered by collective agreements or having a works council.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://econstor.eu/bitstream/10419/88130/1/771936621.pdf
Download Restriction: no

Paper provided by ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research in its series ZEW Discussion Papers with number 13-086.

as
in new window

Length:
Date of creation: 2013
Date of revision:
Handle: RePEc:zbw:zewdip:13086
Contact details of provider: Postal: L 7,1; D - 68161 Mannheim
Phone: +49/621/1235-01
Fax: +49/621/1235-224
Web page: http://www.zew.de/
Email:


More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Paul J. Devereux, 2001. "The Cyclicality of real wages within employer-employee matches," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 54(4), pages 835-850, July.
  2. Ernst Fehr & Lorenz Goette, 2004. "Robustness And Real Consequences Of Nominal Wage Rigidity," Macroeconomics 0409025, EconWPA.
  3. Franz, Wolfgang & Pfeiffer, Friedhelm, 2006. "Reasons for Wage Rigidity in Germany," IZA Discussion Papers 2017, Institute for the Study of Labor (IZA).
  4. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2006. "How wages change: micro evidence from the International Wage Flexibility Project," Working Paper 0620, Federal Reserve Bank of Cleveland.
  5. John T. Addison & Paulino Teixeira & Thomas Zwick, 2010. "German Works Councils and the Anatomy of Wages," ILR Review, Cornell University, ILR School, vol. 63(2), pages 247-270, January.
  6. Lutz Bellmann & Knut Gerlach & Wolfgang Meyer, 2008. "Company-Level Pacts for Employment," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 228(5+6), pages 533-553, December.
  7. Philip Du Caju & Theodora Kosma & Martina Lawless & Tairi Rõõm, 2013. "Why firms avoid cutting wages: survey evidence from European firms," Bank of Estonia Working Papers wp2013-2, Bank of Estonia, revised 24 May 2013.
  8. Oi, Walter Y. & Idson, Todd L., 1999. "Firm size and wages," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 33, pages 2165-2214 Elsevier.
  9. Sebastian Kube & Michel André Maréchal & Clemens Puppe, 2010. "Do wage cuts damage work morale? Evidence from a natural field experiment," IEW - Working Papers 471, Institute for Empirical Research in Economics - University of Zurich, revised Oct 2011.
  10. Weiss, Andrew W, 1980. "Job Queues and Layoffs in Labor Markets with Flexible Wages," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 526-38, June.
  11. Hermann Gartner & Thorsten Schenk & Claus Schnabel, 2010. "Wage cyclicality under different regimes of industrial relations," Kiel Working Papers 1654, Kiel Institute for the World Economy.
  12. Anger, Silke, 2011. "The Cyclicality of Effective Wages within Employer-Employee Matches in a Rigid Labor Market," IZA Discussion Papers 5489, Institute for the Study of Labor (IZA).
  13. Devereux, Paul J. & Hart, Robert A., 2005. "Real Wage Cyclicality of Job Stayers, Within-Company Job Movers, and Between-Company Job Movers," IZA Discussion Papers 1651, Institute for the Study of Labor (IZA).
  14. Christian Dustmann & Uta Schönberg, 2009. "Training and Union Wages," The Review of Economics and Statistics, MIT Press, vol. 91(2), pages 363-376, May.
  15. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward nominal and real wage rigidity: survey evidence from European firms," Working Papers 110, Bank of Greece.
  16. Stiglitz, Joseph E, 1974. "Alternative Theories of Wage Determination and Unemployment in LDC'S: The Labor Turnover Model," The Quarterly Journal of Economics, MIT Press, vol. 88(2), pages 194-227, May.
  17. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  18. Philip Du Caju & Catherine Fuss & Ladislav Wintr, 2012. "Downward Wage Regidity for Different Workers and Firms," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(1), pages 5-32.
  19. Arai, Mahmood, 1999. "Wages, Profits and Capital Intensity: Evidence from Matched Worker-Firm Data," Research Papers in Economics 1999:3, Stockholm University, Department of Economics.
  20. P. Du Caju & C. Fuss & L. Wintr, 2012. "Sectoral differences in downward real wage rigidity: workforce composition, institutions, technology and competition," Journal of Labour Market Research, Springer, vol. 45(1), pages 7-22, March.
  21. Lindbeck, Assar & Snower, Dennis J, 1988. "Cooperation, Harassment, and Involuntary Unemployment: An Insider-Outsider Approach," American Economic Review, American Economic Association, vol. 78(1), pages 167-88, March.
  22. Agell, Jonas & Bennmarker, Helge, 2007. "Wage incentives and wage rigidity: A representative view from within," Labour Economics, Elsevier, vol. 14(3), pages 347-369, June.
  23. repec:iab:iabjlr:v:45:i:1:p:7-22 is not listed on IDEAS
  24. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
  25. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2002. "Insurance within the firm," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C3-1, International Conferences on Panel Data.
  26. Cornelissen, Thomas & Huebler, Oloaf, 2006. "Downward Wage Rigidity and Job Mobility," Hannover Economic Papers (HEP) dp-349, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
  27. L. Wade, 1988. "Review," Public Choice, Springer, vol. 58(1), pages 99-100, July.
  28. Knoppik, Christoph & Beissinger, Thomas, 2001. "How Rigid are Nominal Wages? Evidence and Implications for Germany," IZA Discussion Papers 357, Institute for the Study of Labor (IZA).
  29. Alain Cohn & Ernst Fehr & Benedikt Herrmann & Frédéric Schneider, 2011. "Social comparison in the workplace: evidence from a field experiment," ECON - Working Papers 007, Department of Economics - University of Zurich.
  30. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  31. Malcomson, J.M., 1997. "Contracts, hold-up and labor markets," Discussion Paper Series In Economics And Econometrics 9703, Economics Division, School of Social Sciences, University of Southampton.
  32. Petri Böckerman & Seppo Laaksonen & Jari Vainiomäki, 2003. "Who Bear the Burden of Wage Cuts? Evidence From Finland During the 1990s," Working Papers 0321, University of Tampere, School of Management, Economics.
  33. Holger Alda & Stefan Bender & Hermann Gartner, 2005. "European Data Watch: The linked employer-employee dataset created from the IAB establishment panel and the process-produced data of the IAB (LIAB)," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 125(2), pages 327-336.
  34. Peter Howitt, 2002. "Looking Inside the Labor Market: A Review Article," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 125-138, March.
  35. Akerlof, George A & Yellen, Janet L, 1990. "The Fair Wage-Effort Hypothesis and Unemployment," The Quarterly Journal of Economics, MIT Press, vol. 105(2), pages 255-83, May.
  36. Lazear, Edward P, 1979. "Why Is There Mandatory Retirement?," Journal of Political Economy, University of Chicago Press, vol. 87(6), pages 1261-84, December.
  37. Alan S. Blinder & Don H. Choi, 1989. "A Shred of Evidence on Theories of Wage Stickiness," NBER Working Papers 3105, National Bureau of Economic Research, Inc.
  38. Flinn, Christopher J, 1986. "Wages and Job Mobility of Young Workers," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S88-S110, June.
  39. 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.
  40. Campbell, Carl M, III, 1997. "The Variation in Wage Rigidity by Occupation and Union Status in the US," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 59(1), pages 133-47, February.
  41. Campbell, Carl M, III & Kamlani, Kunal S, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 759-89, August.
  42. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
  43. Baily, Martin Neil, 1974. "Wages and Employment under Uncertain Demand," Review of Economic Studies, Wiley Blackwell, vol. 41(1), pages 37-50, January.
  44. 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].
  45. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:zbw:zewdip:13086. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (ZBW - German National Library of Economics)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.