Arbeitspapier

Do firms provide wage insurance against shocks? - Evidence from Hungary

In this paper I address the question to what extent wages are affected by product market uncertainty. Implicit contract models imply that it is Pareto optimal for risk neutral firms to provide insurance to risk averse workers against shocks. Using matched employer-employee dataset, I adopted the estimation strategy proposed by Guiso et al. (2005) to evaluate wage responses to both permanent and transitory shocks in Hungary and compared my results to similar studies on Italian and Portuguese datasets. I found that firms do insure workers against product market uncertainties, but the magnitude of the wage response differs depending on the nature of the shock. Broadly speaking, the wage response to permanent shocks is twice as high as the response to transitory shocks. Comparing my results to the two other studies, the main difference lies in the elasticity of wages to transitory shocks. Unlike these previous findings, my results show that full insurance to transitory shocks is rejected.

Language
Englisch

Bibliographic citation
Series: MNB Working Papers ; No. 2008/8

Classification
Wirtschaft
Multiple or Simultaneous Equation Models: Panel Data Models; Spatio-temporal Models
Firm Behavior: Theory
Compensation Packages; Payment Methods
Labor Contracts
Subject
product market uncertainty
risk sharing
wage insurance
optimal wage contract
matched employer-employee data
Arbeitskräfte
Lohn
Lohnrigidität
Arbeitsvertrag
Schock
Schätzung
Ungarn

Event
Geistige Schöpfung
(who)
Kátay, Gábor
Event
Veröffentlichung
(who)
Magyar Nemzeti Bank
(where)
Budapest
(when)
2008

Handle
Last update
10.03.2025, 11:45 AM CET

Data provider

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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.

Object type

  • Arbeitspapier

Associated

  • Kátay, Gábor
  • Magyar Nemzeti Bank

Time of origin

  • 2008

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