Starting Wages Respond to Employer’s Risk

Peter Berkhout () and Joop Hartog
Additional contact information
Peter Berkhout: RIGO Research Institute

No 3026, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Firms hiring fresh graduates face uncertainty on the future productivity of workers. Intuitively, one expects starting wages to reflect this. Formal analysis supports the intuition. We use the dispersion of exam grades within a field of education as an indicator of the heterogeneity that employers face. We find solid evidence that starting wages are lower if the variance of exam grades is higher and that starting wages are lower if the skew is higher: employers shift quality risk to new hires, but pay for the opportunity to catch the really good workers.

Keywords: risk; ability; wages (search for similar items in EconPapers)
JEL-codes: J31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2007-09
New Economics Papers: this item is included in nep-bec and nep-lab
References: Add references at CitEc
Citations:

Published - published in: Scottish Journal of Political Economy, 2014, 61 (3), 229-260

Downloads: (external link)
https://docs.iza.org/dp3026.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:iza:izadps:dp3026

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().