Labor Market Risk in Germany

Tom Krebs and Yao Yao ()
Additional contact information
Yao Yao: University of Birmingham

No 9869, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: This paper uses annual data drawn from the GSOEP to estimate individual earnings risk (labor market risk) in Germany for the period 1983-2012. The econometric specification of the earnings process allows for transitory shocks and permanent shocks to individual earnings. We find that both the transitory component and the permanent component of earnings risk have been rising in West Germany in the 1990s and have remained at elevated levels in the 2000s. In contrast, labor market risk in East Germany did not rise. These findings are robust to different sample selection criteria and changes in the specification of the earnings process. We provide a simple welfare calculation that suggests that the negative welfare consequences of the observed rise in the permanent component of earnings risk in West Germany are substantial. We argue that the time series evidence is not consistent with the view that international trade integration has been a main driver of the observed rise in labor market risk in West Germany.

Keywords: labor market risk; Germany (search for similar items in EconPapers)
JEL-codes: D52 J31 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2016-04
New Economics Papers: this item is included in nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
https://docs.iza.org/dp9869.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp9869

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().