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Downward Nominal Wage Rigidity in the OECD

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Author Info
Steinar Holden (University of Oslo and Norges Bank)
Fredrik Wulfsberg (Norges Bank)

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Abstract

Recent microeconomic studies have documented extensive downward nominal wage rigidity (DNWR) for job stayers in many OECD countries, but critics argue that the effect might be undone by compositional changes and flexibility in wages of new entrants. Using data for hourly nominal wages at industry level, we explore the existence of DNWR on industry wages in 19 OECD countries, over the period 1973-1999. We propose a novel method to detect DNWR. We reject the hypothesis of no DNWR in the overall sample. The fraction of wage cuts prevented due to DNWR has fallen over time, from 61 percent in the 1970s to 16 percent in the late 1990s, but the number of industries affected by DNWR has increased. DNWR is more prevalent when unemployment is low and union density is high. Strict employment protection legislation also leads to fewer wage cuts.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Advances in Macroeconomics.

Volume (Year): 8 (2008)
Issue (Month): 1 ()
Pages: 1651-1651
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Handle: RePEc:bep:macadv:v:8:y:2008:i:1:p:1651-1651

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Related research
Keywords: downward nominal wage rigidity OECD employment protection legislation wage setting

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Find related papers by JEL classification:
E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Pedro S. Martins, 2008. "Rent Sharing Before and After the Wage Bill," Working Papers 12, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research. [Downloadable!]
    Other versions:
  2. Steinar Holden & Fredrik Wulfsberg, 2007. "Are Real Wages Rigid Downwards?," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  3. Carlsson, Mikael & Westermark, Andreas, 2007. "Optimal Monetary Policy under Downward Nominal Wage Rigidity," Working Paper Series 2007:15, Uppsala University, Department of Economics. [Downloadable!]
    Other versions:
  4. Steinar Holden & Fredrik Wulfsberg, 2007. "How strong is the case for downward real wage rigidity?," Working Papers 07-6, Federal Reserve Bank of Boston. [Downloadable!]
  5. Fei Peng & W. Stanley Siebert, 2007. "Real Wage Cyclicality in Germany and the UK: New Results Using Panel Data," IZA Discussion Papers 2688, Institute for the Study of Labor (IZA). [Downloadable!]
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