Wages and the Risk of Displacement

Anabela Carneiro and Pedro Portugal ()

CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: In this paper a simultaneous-equations model of firm closing and wage determination is developed in order to analyse how wages adjust to unfavorable shocks that raise the risk of displacement through firm closing, and to what extent a wage change affects the exit likelihood. Using a longitudinal matched worker-firm data set from Portugal, the results show that the fear of job loss generates wage concessions instead of compensating differentials. A novel result that emerges from this study is that firms with a higher incidence of minimum wage earners are more vulnerable to adverse demand shocks due to their inability to adjust wages downward. In fact, minimum wage restrictions were seen to increase the failure rates.

Keywords: Wages; Displacement Risk; Concessions (search for similar items in EconPapers)
JEL-codes: J31 J65 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2003-05
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://www.fep.up.pt/investigacao/cete/papers/dp0308.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (http://www.fep.up.pt/investigacao/cete/papers/dp0308.pdf [302 Found]--> https://fep.up.pt/investigacao/cete/papers/dp0308.pdf)

Related works:
Working Paper: Wages and the risk of displacement (2010)
Chapter: Wages and the Risk of Displacement (2008)
Working Paper: Wages and the Risk of Displacement (2006)
Working Paper: Wages and the Risk of Displacement (2003)
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:por:cetedp:0308

Access Statistics for this paper

More papers in CEF.UP Working Papers from Universidade do Porto, Faculdade de Economia do Porto Contact information at EDIRC.
Bibliographic data for series maintained by Ana Bonanca ().