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Research Institute of Industrial Economics (IFN) Working Paper Series

No 729:
How Wage Compression Affects Job Turnover

Fredrik Heyman ()

Abstract: I use Swedish establishment-level panel data to test Bertola and Rogersonís (1997) hypothesis of a positive relation between the degree of wage compression and job reallocation. Results indicate that the effect of wage compression on job turnover is positive and significant in the manufacturing sector. The wage compression effect is stronger on job destruction than on job creation, consistent with downward wage rigidity. Further results include a strong positive relationship between the fraction of temporary employees and job turnover and a negative relationship between the amount of working-time flexibility and job reallocation.

Keywords: Job Creation and Job Destruction; Wage Dispersion; Temporary Employment Contracts; Panel Data; (follow links to similar papers)

JEL-Codes: J21; J31; J63; (follow links to similar papers)

24 pages, January 28, 2008

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