TY  - RPRT
        AU  - Carneiro, Anabela
AU  - Portugal, Pedro
        TI  - Wages and the Risk of Displacement
        PY  - 2006/Jan/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 1926
        UR  - https://www.iza.org/publications/dp1926
        AB  - In this paper a simultaneous-equations model of firm closing and wage determination is developed in order to analyse how wages adjust to unfavorable shocks that raise the risk of displacement through firm closing, and to what extent a wage change affects the exit likelihood. Using a longitudinal matched worker-firm data set from Portugal, the results show that the fear of job loss generates wage concessions instead of compensating differentials. A novel result that emerges from this study is that firms with a higher incidence of minimum wage earners are more vulnerable to adverse demand shocks due to their inability to adjust wages downward. In fact, minimum wage restrictions were seen to increase the failure rates.
        KW  - displacement risk
KW  - concessions
KW  - wages
        ER  -