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An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition

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  • Ludsteck, Johannes
  • Haupt, Harry

Abstract

A firm that faces insufficient supply of labor can either increase the wage offer to attract more applicants, or reduce the hiring standard to enlarge the pool of potential employees, or do both. This simultaneous adjustment of wages and hiring standards has been emphasized in a classical contribution by Reder (1955) and implies that wage reactions to employment changes can be expected to be more pronounced for low wage workers than for high wage workers. We test this hypothesis (together with a related hypothesis on firm-specific human capital) by applying a bootstrap-based quantile regression approach to censored panel data from the German employment register. Our findings suggest that market clearing is achieved by a combination of wage and hiring standards adjustment.

Suggested Citation

  • Ludsteck, Johannes & Haupt, Harry, 2007. "An Empirical Test of Reder Competition and Specific Human Capital Against Standard Wage Competition," Discussion Papers in Economics 1977, University of Munich, Department of Economics.
    • Handle: RePEc:lmu:muenec:1977
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    File URL: https://epub.ub.uni-muenchen.de/1977/1/Concertina.pdf
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    References listed on IDEAS

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    Cited by:

    1. Achim Schmillen & Joachim Möller, 2009. "Determinants of Lifetime Unemployment - A Micro Data Analysis with Censored Quantile Regressions," Working Papers 275, Leibniz Institut für Ost- und Südosteuropaforschung (Institute for East and Southeast European Studies).
    2. Schlicht, Ekkehart, 2008. "Wage Dispersion, Over-Qualification, and Reder Competition," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 1, pages 1-22.
    3. Büttner, Thomas & Jacobebbinghaus, Peter & Ludsteck, Johannes, 2010. "Occupational upgrading and the business cycle in West Germany," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 4, pages 1-37.
    4. Schmillen, Achim & Möller, Joachim, 2012. "Distribution and determinants of lifetime unemployment," Labour Economics, Elsevier, vol. 19(1), pages 33-47.

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    More about this item

    Keywords

    wage setting; hiring standards; wage structure; efficiency wages; panel quantile regression; censoring;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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