Better Safe than Sorry? The Effects of Income Risk and Unemployment Risk on Wages

18 Pages Posted: 8 Aug 2014

See all articles by Wolfgang Nagl

Wolfgang Nagl

Institute for Advanced Studies (IHS)

Date Written: September 2014

Abstract

We study the effects of income risk and unemployment risk on individual wages simultaneously. Starting point for the empirical analysis is a portfolio model for the labor market. This model shows positive wage effects for both risks but also a negative interaction effect. Using German administrative panel data we estimate the effects of the income risk, the unemployment risk and their interaction on individual wages separately for men and women in East and West Germany. We find the expected positive wage effects for both risks as well as a negative interaction effect. The marginal effect of income risk on wages is positive, whereas the marginal effect of unemployment risk is negative.

JEL Classification: J30, J31, J39

Suggested Citation

Nagl, Wolfgang, Better Safe than Sorry? The Effects of Income Risk and Unemployment Risk on Wages (September 2014). LABOUR, Vol. 28, Issue 3, pp. 251-268, 2014, Available at SSRN: https://ssrn.com/abstract=2477604 or http://dx.doi.org/10.1111/labr.12033

Wolfgang Nagl (Contact Author)

Institute for Advanced Studies (IHS) ( email )

Josefstädter Straße 39
A-1080 Vienna
Austria

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