P13

Project Team:
PD Dr. Nicole Gürtzgen, ZEW Mannheim
Anja Heinze, ZEW Mannheim

The aim of this project is to study the extent to which employers provide wage insurance at the firm level. Particular emphasis is given to the role trade unions may play in enabling risk-sharing contracts between workers and firms. In particular, we adopt the identification strategy proposed by Guiso et al. (2005) for the case of Germany. As their identification strategy allows for a distinction between transitory and permanent shocks, we examine two central hypotheses. Given the union's role in facilitating risk-sharing arrangements between workers and their employers, the first natural hypothesis to be tested is that centralised wage contracts provide workers with full insurance against transitory shocks at the firm level. As such a full insurance is likely to induce substantial job loss if shocks are of more permanent nature, the second hypothesis to be tested is that flexibility provisions within centralised wage contracts allow for a response to persistent demand shocks. In a second step, we examine the implications for the extent of plant-specific job reallocation.