Abstract

According to theories by Melvin Reder (1953) and Ekkehart Schlicht, companies adjust both wages and qualification standards in order to adapt to cyclical fluctuations in their product demand. Qualification standards here do not refer to formal qualifications such as completed vocational training, bachelor's or master's degrees, but rather to qualification levels within these formal standards, e.g., firm-specific human capital, but also unobservable productivity factors such as leadership qualities and motivation. An empirically testable implication of these theories is that the wages of less qualified employees, who, ceteris paribus, are lower down in the wage distribution, react more strongly to cyclical fluctuations in the unemployment rate than those of their better-qualified colleagues. Since fixed-effects quantile regressions are not suitable for answering this question, the project is developing a two-stage procedure to estimate the relationship between employees' position in the wage distribution and the cyclical sensitivity of their wages.