Risk Sharing in Labor Markets
Empirical work in labor economics has focused on rent sharing as an explanation for the observed correlation between wages and profitability. The alternative explanation of risk sharing between workers and employers has not been tested. Using a uni...
| Main Authors: | , , , , , , , , , , , |
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| Language: | English en_US |
| Published: |
Washington, DC: World Bank
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2003/09/17742612/risk-sharing-labor-markets http://hdl.handle.net/10986/17184 |
| Summary: | Empirical work in labor economics has
focused on rent sharing as an explanation for the observed
correlation between wages and profitability. The alternative
explanation of risk sharing between workers and employers
has not been tested. Using a unique panel data set for four
African countries, Authors find strong evidence of risk
sharing. Workers in effect offer insurance to employers:
when firms are hit by temporary shocks, the effect on
profits is cushioned by risk sharing with workers. Rent
sharing is a symptom of an inefficient labor market. Risk
sharing; by contrast, can be seen as an efficient response
to missing markets. Authors evidence suggests that risk
sharing accounts for a substantial part of the observed
effect of shocks on wages. |
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