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M. Kerndler:
"Size and persistence matter: Wage and employment insurance at the micro level";
Bericht für Econ Wps; 2019; 36 S.

Firms provide substantial insurance against wage fluctuations and job loss. This paperstudies how the interaction between shock size and persistence affects the firm´s ability toinsure workers against idiosyncratic firm-level shocks. Using linked employer-employee datafrom Germany, I find that wages respond largely symmetrically to positive and negativepermanent shocks. Whereas transitory shocks lead to upward wage rigidity. Individuallayoff probabilities only increase in response to negative permanent shocks. Interestingly,wage cuts and job loss after negative shocks are limited to blue-collar workers. Whereaswhite-collar workers are fully insured against negative shocks both in terms of wages andemployment.

https://www.econ.tuwien.ac.at/wps/econ_wp_2019_04.pdf