An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition

Johannes Ludsteck and Harry Haupt

Discussion Papers in Economics from University of Munich, Department of Economics

Abstract: A firm that faces insufficient supply of labor can either increase the wage offer to attract more applicants, or reduce the hiring standard to enlarge the pool of potential employees, or do both. This simultaneous adjustment of wages and hiring standards has been emphasized in a classical contribution by Reder (1955) and implies that wage reactions to employment changes can be expected to be more pronounced for low wage workers than for high wage workers. We test this hypothesis (together with a related hypothesis on firm-specific human capital) by applying a bootstrap-based quantile regression approach to censored panel data from the German employment register. Our findings suggest that market clearing is achieved by a combination of wage and hiring standards adjustment.

Keywords: wage setting; hiring standards; wage structure; efficiency wages; panel quantile regression; censoring (search for similar items in EconPapers)
JEL-codes: C24 J31 J41 (search for similar items in EconPapers)
Date: 2007-07
New Economics Papers: this item is included in nep-bec and nep-hrm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:lmu:muenec:1977

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