Unemployment risk and wage differentials

Roberto Pinheiro and Ludo Visschers

UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía

Abstract: Workers in less secure jobs are often paid less than identical-looking workers in more secure jobs. We show that this lack of compensating differentials for unemployment risk can arise in equilibrium when all workers are identical, and firms differ, but do so only in offered job security (the probability that the worker is not sent into unemployment). In a setting where workers search on and off the job, wages paid increase with job security for at least all firms in the risky tail of the distribution of firm-level unemployment risk. As a result, unemployment spells become persistent for low-wage and unemployed workers, a seeming pattern of ‘unemployment scarring’, that is created entirely by firm heterogeneity alone. Higher in the wage distribution, workers can take wage cuts to move to more stable employment.

Keywords: Layoff; rates; Unemployment; risk; Wage; differentials; Unemployment; scarring (search for similar items in EconPapers)
JEL-codes: J31 J63 (search for similar items in EconPapers)
Date: 2012-01
New Economics Papers: this item is included in nep-dge, nep-lab and nep-lma
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://e-archivo.uc3m.es/rest/api/core/bitstreams ... 699d048b5474/content (application/pdf)

Related works:
Journal Article: Unemployment risk and wage differentials (2015)
Working Paper: Unemployment Risk and Wage differentials (2015)
Working Paper: Unemployment Risk and Wage Differentials (2014)
Working Paper: Unemployment Risk and Wage Differentials (2014)
Working Paper: Unemployment Risk and Wage Differentials (2013)
Working Paper: Unemployment Risk and Wage Differentials (2013)
Working Paper: Unemployment Risk and Wage Differentials (2013)
Working Paper: Unemployment risk and wage differentials (2012)
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:cte:werepe:we1209

Access Statistics for this paper

More papers in UC3M Working papers. Economics from Universidad Carlos III de Madrid. Departamento de Economía
Bibliographic data for series maintained by Ana Poveda ().