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Downward wage rigidity and job mobility

Cornelissen, T.; Hubler, O.; (2008) Downward wage rigidity and job mobility. Empirical Economics , 34 (2) pp. 205-230. 10.1007/s00181-007-0118-5.

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Using data from the German Socio-Economic Panel (GSOEP) we study whether being individually affected by downward wage rigidity has an effect on layoffs, quits and intra-firm mobility. Within a structural empirical model we estimate the individual extent of wage rigidity. This is expressed by the wage sweep-up, which measures by how much individual wage growth increases through the effect of downward wage rigidity when compared to a counterfactual labour market with flexible wage setting. We find robust negative effects of wage sweep-up on quits and layoffs and some evidence for a positive association of wage sweep-up and promotion opportunities. This is consistent with a core-periphery view of the labour force, where a core work force is protected from layoffs and wage cuts and at the same time enjoys good promotion opportunities. On the other side a peripheral work force provides a buffer for adjustment and suffers from both flexible wages, more insecure jobs and less internal promotion opportunities.

Type: Article
Title: Downward wage rigidity and job mobility
DOI: 10.1007/s00181-007-0118-5
Publisher version: http://dx.doi.org/10.1007/s00181-007-0118-5
Language: English
Keywords: Wage rigidity, wage sweep-up, quits, layoffs, promotions
UCL classification: UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of SandHS > Dept of Economics
URI: http://discovery.ucl.ac.uk/id/eprint/17415
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