Risk Sharing in Labour Markets

Arne Bigsten (), Paul Collier, Stefan Dercon, Marcel Fafchamps, Jan Willem Gunning, Abena Oduro, Remco Oostendorp, Cathy Pattillo, Mans Soderbom, Francis Teal and Albert Zeufack ()
Additional contact information
Paul Collier: University of Oxford
Cathy Pattillo: International Monetary Fund, Washington
Francis Teal: University of Oxford

No 03-077/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: Empirical work in labour economics has focused on rent sharing as an explanation for the observed correlation in cross-sections between wages and profitability. The alternative explanation of risk sharing between workers and employers has not been tested. Using a unique panel data set for four African countries we find strong evidence of risk sharing. Workers in effect offer insurance to employers: when firms are hit by temporary shocks the effect on profits is cushioned by risk sharing with workers. Rent sharing is a symptom of an inefficient labor market. Risk sharing, however, can be seen as an efficient response to missing markets. Our evidence suggests that risk sharing accounts for a substantial part of the observed effect of shocks on wages.

Keywords: Risk sharing; labor markets; rent sharing; insurance (search for similar items in EconPapers)
JEL-codes: J31 O12 (search for similar items in EconPapers)
Date: 2003-09-29
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Citations: View citations in EconPapers (2)

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Journal Article: Risk Sharing in Labor Markets (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20030077

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