DP16823 Minimum Wages and Insurance within the Firm
|Author(s):||Effrosyni Adamopoulou, Francesco Manaresi, Omar Rachedi, Emircan Yurdagul|
|Publication Date:||December 2021|
|Keyword(s):||complementarities, Firm-specific shocks, General Equilibrium, Linked employer-employee data, Minimum Wages, Pass-Through|
|JEL(s):||E24, E25, E64, J31, J38, J52|
|Programme Areas:||Labour Economics, Macroeconomics and Growth|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=16823|
Minimum wages alter the allocation of firm-idiosyncratic risk across workers. To establish this result, we focus on Italy, and leverage employer-employee data matched to firm balance sheets and hand-collected wage floors. We find a relatively larger pass-through of firm-specific labor-demand shocks into wages for the workers whose earnings are far from the floors, but who are employed by establishments intensive in minimum-wage workers. We study the welfare implications of this fact using an incomplete-market model. The asymmetric pass-through uncovers a novel channel which tilts the benefits of removing minimum wages toward high-paid employees at the expense of low-wage workers.