Minimum Wages and Insurance within the Firm

48 Pages Posted: 19 May 2022

See all articles by Effrosyni Adamopoulou

Effrosyni Adamopoulou

University of Mannheim and IZA

Francesco Manaresi

Organization for Economic Co-Operation and Development (OECD)

Omar Rachedi

ESADE Business School

Emircan Yurdagul

Charles III University of Madrid; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 3 versions of this paper

Abstract

Minimum wages alter the allocation of firm-idiosyncratic risk across workers. To establish this result, we focus on Italy, and leverage employer-employee data matched to firm balance sheets and hand-collected wage floors. We find a relatively larger pass-through of firm-specific labor-demand shocks into wages for the workers whose earnings are far from the floors, but who are employed by establishments intensive in minimum-wage workers. We study the welfare implications of this fact using an incomplete-market model. The asymmetric passthrough uncovers a novel channel which tilts the benefits of removing minimum wages toward high-paid employees at the expense of low-wage workers.

Keywords: firm-specific shocks, pass-through, minimum wages, linked employer-employee data, general equilibrium, complementarities

JEL Classification: E24, E25, E64, J31, J38, J52

Suggested Citation

Adamopoulou, Effrosyni and Manaresi, Francesco and Rachedi, Omar and Yurdagul, Emircan, Minimum Wages and Insurance within the Firm. IZA Discussion Paper No. 14943, Available at SSRN: https://ssrn.com/abstract=4114449 or http://dx.doi.org/10.2139/ssrn.4114449

Effrosyni Adamopoulou (Contact Author)

University of Mannheim and IZA ( email )

L7, 3-5
Mannheim
Germany

Francesco Manaresi

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Omar Rachedi

ESADE Business School ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

Emircan Yurdagul

Charles III University of Madrid ( email )

CL. de Madrid 126
Madrid, 28903
Spain

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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