Unemployment Risk and Compensating Differentials in New Jersey Manufacturing

Posted: 29 Feb 2008

See all articles by Susan L. Averett

Susan L. Averett

Lafayette College - Department of Economics & Business

Howard Bodenhorn

National Bureau of Economic Research (NBER); Clemson University - College of Business and Behavioral Science

Justas Staisiunas

Lafayette College - Department of Economics & Business

Date Written: October 2005

Abstract

We present evidence that low-skill workers received larger compensating differentials than more skilled workers when facing unanticipated unemployment in an era without unemployment insurance. Using information from surveys of New Jersey workers conducted during the 1880s, we test the theory of compensating wage differentials. We find that workers who faced a higher probability of predictable unemployment received compensating differentials and that the size of the differential differed across industries and skill levels. With few firm- or industry-specific skills, unskilled workers were less subject to "informational capture" than skilled workers who had more but less easily transferable human capital.

JEL Classification: N31

Suggested Citation

Averett, Susan and Bodenhorn, Howard and Staisiunas, Justas, Unemployment Risk and Compensating Differentials in New Jersey Manufacturing (October 2005). Economic Inquiry, Vol. 43, Issue 4, pp. 734-749, 2005. Available at SSRN: https://ssrn.com/abstract=906347

Susan Averett (Contact Author)

Lafayette College - Department of Economics & Business ( email )

Easton, PA 18042
United States
610-250-5307 (Phone)
610-250-8961 (Fax)

Howard Bodenhorn

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Clemson University - College of Business and Behavioral Science ( email )

Clemson, SC 29631
United States

Justas Staisiunas

Lafayette College - Department of Economics & Business ( email )

Easton, PA 18042
United States

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