DP10711 Employment and Wage Insurance within Firms: Worldwide Evidence

Author(s): Andrew Ellul, Marco Pagano, Fabiano Schivardi
Publication Date: July 2015
Keyword(s): family firms, insurance, risk-sharing, social security, unemployment, wages
JEL(s): G31, G32, G38, H25, H26, M40
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10711

We investigate the determinants of firms? implicit insurance to employees, using a difference-in-difference approach: we rely on differences between family and non-family firms to identify the supply of insurance, and exploit variation in unemployment insurance across and within countries to gauge workers? demand for insurance. Using a firm-level panel from 41 countries, we find that family firms feature more stable employment, greater wage flexibility and lower labor cost than non-family ones. Employment stability in family firms is greater, and the wage discount larger, in countries with more generous public unemployment insurance: private and public provision of employment insurance are substitutes.