EconPapers    
Economics at your fingertips  
 

Wages and the risk of displacement

Anabela Carneiro () and Pedro Portugal

No 1159, Working Paper Series from European Central Bank

Abstract: In this paper a simultaneous-equations model of firm closing and wage determination is specified in order to analyse how wages adjust to unfavorable product demand shocks that raise the risk of displacement through firm closing, and to what extent an exogenous wage change affects the exit likelihood. Using a longitudinal matched worker-firm data set from Portugal, the estimation results suggest that, under the existence of noncompetitive rents, the fear of job loss leads workers to accept wage concessions, even though a compensating differential for the ex ante risk of displacement might exist. A novel result that emerges from this study is that firms with a higher incidence of minimum wage earners are more vulnerable to adverse shocks due to their inability to adjust wages downward. Indeed, minimum wage restrictions were seen to increase the failure rates. JEL Classification: J31, J65

Keywords: concessions; displacement risk; wages (search for similar items in EconPapers)
Date: 2010-02
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp1159.pdf (application/pdf)

Related works:
Chapter: Wages and the Risk of Displacement (2008) Downloads
Working Paper: Wages and the Risk of Displacement (2006) Downloads
Working Paper: Wages and the Risk of Displacement (2003) Downloads
Working Paper: Wages and the Risk of Displacement (2003) Downloads
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:ecb:ecbwps:20101159

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().

 
Page updated 2020-01-21
Handle: RePEc:ecb:ecbwps:20101159