Risk of Firm Closure and Wages in Brazil: Compensating Wage Di erentials or Bargaining Concessions?

Luiz Esteves

No 77, Working Papers from Universidade Federal do Paraná, Department of Economics

Abstract: The economic theory proposes two hypotheses for the relationship between wages and risk of job loss due to rm (or plant) closure. The rst hypothesis posits that workers at greater risk should be compensated by higher wages. This is known as the theory of compensating wage diferentials. The second hypothesis states that workers at rms with a greater risk of closure would be willing to exchange higher wages for longer-term stability in the job. This is known as the theory of bargaining concessions. There is a paucity of empirical studies on this issue, and the results have been inconsistent. The aim of this paper is to provide evidence for the Brazilian manufacturing industry. To accomplish that, diferent risk measures, diferent databases, and di erent econometric methods are used. All the tests performed in this study con rm the theory of compensating wage diferentials.

Keywords: exit; bankruptcy; severance payments; insolvency; wage determination (search for similar items in EconPapers)
JEL-codes: C31 C33 G10 G33 J30 L25 L60 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2008
Note: Creation Date corresponds to the year in which the paper was published on the Department of Economics website. The paper may have been written a small number of months before its publication date.
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Persistent link: https://EconPapers.repec.org/RePEc:fup:wpaper:0077

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