The Price of Security: On the Causality and Impact of Lay-off Risks on Wages

Stefan Arent () and Wolfgang Nagl

No 100, ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich

Abstract: We examine the impact of lay-off risks on wages. Portfolio as well as search theoretic modelling predicts higher exogenous lay-off risks to go along with higher wages. But, an impact of wages on lay-off risks (e.g., endogenous job destruction) is also plausible. Using the German BA Employment Panel (2008), we estimate a wage equation with exogenous lay-off risks for the most important industries in West Germany. We address the mutual causality by controlling for endogeneity via an instrumental variable approach. Furthermore, we restrict our analysis to the high skilled to avoid a high impact on tariff commitment. Our findings suggest the presence of risk premiums in three of five industries. The level of impact and its significance depends on the industry and on the gender of the employee.

JEL-codes: I31 J63 (search for similar items in EconPapers)
Date: 2011
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.ifo.de/DocDL/IfoWorkingPaper-100.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:ces:ifowps:_100

Access Statistics for this paper

More papers in ifo Working Paper Series from ifo Institute - Leibniz Institute for Economic Research at the University of Munich Contact information at EDIRC.
Bibliographic data for series maintained by Klaus Wohlrabe ().