Do Wages Compensate for Risk of Unemployment? Parametric and Semiparametric Evidence from Seasonal Jobs.

Due to unique institutional and technological factors, seasonal agricultural jobs are characterized by much higher risk of unemployment than similar permanent jobs. I estimate compensating differentials for risk of unemployment and compare those with unemployment insurance benefits provided by the government. I use two sets of estimators. First, I calculate parametric estimates with Heckman correction. Second, I compute three versions of a distribution-free semiparametric estimator which is robust to misspecification of the residual distribution. The main finding of the paper is that there exists a positive compensating differential of 15.5 percent of the average wage. This corresponds to an implicit replacement rate significantly larger than the typical unemployment benefit. Copyright 2000 by Kluwer Academic Publishers