Working Paper Series,
Trade Union Institute for Economic Research

Abstract: This paper uses Swedish establishment-level panel data to test the hypothesis of a positive relation between the degree of wage compression and job reallocation as proposed by Bertola and Rogerson (1997). The effect of wage dispersion on job turnover is negative and significant in the manufacturing sector. The wage com-pression effect is stronger on job destruction than on job creation, suggesting that wages are more downward than upward rigid. Further results include (i) a strong positive relationship between the industry share of temporary employees and job turnover and (ii) 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

JEL-codes: J21; J31; J63

28 pages, November 11, 2002

Note: This paper is Chapter 2 of my 2002 Stockholm School of Economics Ph.D. thesis.

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