Size and persistence matters: Wage and employment insurance at the micro level

Martin Kerndler

VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association

Abstract: Firms provide substantial insurance against wage fluctuations and job loss. This paper studies how the interaction between shock size and persistence affects the firm's ability to insure workers against idiosyncratic firm-level shocks. Using linked employer-employee data from Germany, I find that wages respond largely symmetrically to positive and negative permanent shocks. Whereas transitory shocks lead to upward wage rigidity. Individual layoff probabilities only increase in response to negative permanent shocks. Interestingly, wage cuts and job loss after negative shocks are limited to blue-collar workers. Whereas white-collar workers are fully insured against negative shocks both in terms of wages and employment.

Keywords: wage insurance; layoffs; linked employer-employee data; Kalman filter (search for similar items in EconPapers)
JEL-codes: C33 D22 J33 J41 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-ias
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Size and persistence matter: Wage and employment insurance at the micro level (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc19:203493

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