Better Safe than Sorry? The Effects of Income Risk, Unemployment Risk and the Interaction of these Risks on Wages

We examine whether income and unemployment risks are compensated by individual wages. Using a portfolio approach we show that the marginal income risk effect on wages is always positive whereas the marginal unemployment risk effect crucially depends on the income risk. The interaction effect between both risk measures is negative. Using administrative panel data from Germany we confirm the theoretically predicted signs for both risks and their interaction effect.

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Year of publication:	2012
Authors:	Nagl, Wolfgang
Publisher:	Munich : ifo Institute - Leibniz Institute for Economic Research at the University of Munich
Subject:	Income risk \| unemployment risk \| interaction effect \| wages

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Series:	ifo Working Paper ; 148
Type of publication:	Book / Working Paper
Type of publication (narrower categories):	Working Paper
Language:	English
Other identifiers:	734539495 [GVK] hdl:10419/73749 [Handle] RePec:ces:ifowps:_148 [RePEc]
Classification:	J30 - Wages, Compensation, and Labor Costs. General ; J31 - Wage Level and Structure; Wage Differentials by Skill, Training, Occupation, etc ; J64 - Unemployment: Models, Duration, Incidence, and Job Search
Source:	EconStor

Persistent link: https://www.econbiz.de/10010312102