Wages and the risk of displacement
By: by Anabela Carneiro, Pedro Portugal
Contributors: Portugal, Pedro
Series: Discussion paper -- no. 1926; Discussion paper (Forschungsinstitut zur Zukunft der Arbeit : Online) -- no. 1926
Publisher: IZA
Published: 2006
Place of publication: Bonn, Germany
Language: eng
Format: [electronic resource] /
Subjects: Plant shutdowns; Unemployment; Wages
Description: "In this paper a simultaneous-equations model of firm closing and wage determination is developed in order to analyse how wages adjust to unfavorable shocks that raise the risk of displacement through firm closing, and to what extent a wage change affects the exit likelihood. Using a longitudinal matched worker-firm data set from Portugal, the results show that the fear of job loss generates wage concessions instead of compensating differentials. A novel result that emerges from this study is that firms with a higher incidence of minimum wage earners are more vulnerable to adverse demand shocks due to their inability to adjust wages downward. In fact, minimum wage restrictions were seen to increase the failure rates"--Forschungsinstitut zur Zukunft der Arbeit web site.
Notes: Title from PDF file as viewed on 1/18/2006.

Includes bibliographical references.

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