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Journal Article

Risk Sharing in Labor Markets

AVERAGE WAGE AVERAGE WAGES BARGAINING BARGAINING POWER BORROWING CAPITAL STOCK COBB-DOUGLAS PRODUCTION FUNCTION COMMERCIAL CONTRACTS COMPETITIVE MODEL CONTRACT ENFORCEMENT CONTRACTUAL RELATIONS CREDIT MARKET CREDIT MARKETS CREDIT RATIONING CRISES DEVELOPING COUNTRY DEVELOPMENT ECONOMICS DISPUTE ¨ RESOLUTION DUMMY VARIABLES ECONOMETRIC ANALYSIS ECONOMIC DEVELOPMENT ECONOMIC PERFORMANCE ECONOMIC RENTS EFFICIENCY WAGES ELASTICITY EMPLOYEE EMPLOYMENT EQUILIBRIUM UNEMPLOYMENT EXCHANGE RATE EXOGENOUS SHOCKS EXPECTED VALUE EXPORTS FINANCIAL MARKETS FIRM PERFORMANCE FIRM SIZE GOVERNMENT INTERVENTION HIGH WAGE HOLDING HUMAN CAPITAL IMPLICIT CONTRACT IMPLICIT CONTRACTS INCOME INEFFICIENCY INFORMAL CREDIT INSTRUMENT INSURANCE INSURANCE MARKET INSURANCE MARKETS INTERNATIONAL BANK INVENTORIES LABOR CONTRACTS LABOR ECONOMICS LABOR FORCE LABOR MARKET LABOR MARKETS LABOR SUPPLY LABOR TURNOVER LIQUID ASSETS LIQUIDITY LIQUIDITY CRISES MISSING MARKETS MONETARY FUND NEGATIVE SHOCK NEGATIVE SHOCKS OCCUPATION OPTIMAL CONTRACT PERMANENT SHOCK PERMANENT SHOCKS POLITICAL ECONOMY PRICE VOLATILITY PRIMARY EDUCATION PRODUCTION FUNCTION PRODUCTION WORKERS PRODUCTIVITY RATES OF RETURN RENTS RISK AVERSE RISK AVERSION RISK PREMIUM RISK SHARING STOCKS SUPPLIERS SUPPLY CURVE TOTAL OUTPUT TOTAL WAGE TRANSACTION TRANSACTION COSTS UNEMPLOYED UNEMPLOYMENT VALUE ADDED WAGE BARGAINING WAGE BILL WAGE DIFFERENTIALS WAGE EFFECT WAGE INCREASE WAGE LEVELS WAGE PREMIUM WAGE RATE WAGE RATES WAGE RIGIDITY WAGES WORK EXPERIENCE WORKER WORKER HETEROGENEITY WORKERS
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Washington, DC: World Bank
Africa | Sub-Saharan Africa | Cameroon | Ghana | Kenya | Zimbabwe
2014-02-26T20:34:41Z | 2014-02-26T20:34:41Z | 2003-09

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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