Flexicurity, Wage Dynamics and Inequality Over the Life-Cycle
41 Pages Posted: 5 Sep 2011
Date Written: August 31, 2011
We investigate the relationship between life-cycle wages and flexicurity in Denmark. We separate permanent from transitory wages and characterise flexicurity using membership of unemployment insurance funds. We find that flexicurity is associated with lower wage growth heterogeneity over the life-cycle and greater wage instability, changing the nature of wage inequality from permanent to transitory. While we are in general unable to formally test for moral hazard against adverse selection into unemployment insurance membership, robustness checks suggest that moral hazard is the relevant interpretation.
Keywords: unemployment insurance, wage dynamics, wage inequality, wage instability
JEL Classification: J310, J650
Suggested Citation: Suggested Citation