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Title: Wages and Worker Displacement in Germany

Author(s): Michael C Burda and Antje Mertens

Publication Date: April 1998

Keyword(s): Displaced Workers, Tenure, Wage Determination and Wage Rigidity

Programme Area(s): Human Resources

Abstract: This paper investigates the effect of displacement on wages of socially insured German workers, who became unemployed in 1986. Because detailed information on job loss is unavailable, displacement status is predicted using a probit, estimated on the German Socioeconomic Panel. In contrast to US findings, post-displacement wages decline only slightly upon re-employment. The lowest earnings quartile, in which displacement is concentrated, even gains slightly (2%), while wage growth losses for the upper three quartiles are higher (17%). Limited wage adjustment of displaced workers is likely to play an important role in explaining aggregate wage rigidity in Germany.

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Bibliographic Reference

Burda, M and Mertens, A. 1998. 'Wages and Worker Displacement in Germany'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1869