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Downward Nominal Rigidity in West German Earnings, 1975-95

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  • Beissinger Thomas
  • Knoppik Christoph

    (University of Regensburg, Regensburg, Bavaria, Germany)

Abstract

If downward nominal wage rigidity exists, it should affect the distribution of earnings changes. We present a common analytical framework for three distinct and previously unconnected approaches to the analysis of downward nominal rigidity, the skewness±location approach, the symmetry approach and the histogram±location approach. We modify them by dropping the assumption of time-invariant rigidity and apply them to earnings data from the IABB-escha Èftigtenstichprobe (IABS). We find that the distribution of West German log earnings changes is indeed affected by downward nominal rigidity. Our modification of the approaches also allows us to find that the degree of nominal rigidity depends on business cycle conditions, with weaker rigidity in times of rising unemployment. Our findings support the critics of very low inflation targets.

Suggested Citation

  • Beissinger Thomas & Knoppik Christoph, 2001. "Downward Nominal Rigidity in West German Earnings, 1975-95," German Economic Review, De Gruyter, vol. 2(4), pages 385-417, December.
    • Handle: RePEc:bpj:germec:v:2:y:2001:i:4:p:385-417
    DOI: 10.1111/1468-0475.00046
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    Cited by:

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    2. Thomas Beissinger & Chritoph Knoppik, 2005. "Sind Nominallöhne starr? Neuere Evidenz und wirtschaftspolitische Implikationen," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(2), pages 171-188, May.
    3. Smith, Jennifer C., 2002. "Pay cuts and morale: a test of downward nominal rigidity," Economic Research Papers 269462, University of Warwick - Department of Economics.
    4. Knoppik, Christoph, 2007. "Skewness and Location of Distributions of Wage Change Rates in the Presence of Downward Nominal Wage Rigidity," University of Regensburg Working Papers in Business, Economics and Management Information Systems 420, University of Regensburg, Department of Economics.
    5. Aedín Doris & Donal O’Neill & Olive Sweetman, 2015. "Wage flexibility and the great recession: the response of the Irish labour market," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-24, December.
    6. Louis N. Christofides & Thanasis Stengos, 2003. "Wage Rigidity in Canadian Collective Bargaining Agreements," ILR Review, Cornell University, ILR School, vol. 56(3), pages 429-448, April.
    7. Knoppik, Christoph, 2007. "The kernel-location approach: A new non-parametric approach to the analysis of downward nominal wage rigidity in micro data," Economics Letters, Elsevier, vol. 97(3), pages 253-259, December.
    8. Andrea Repetto & Alejandro Jofré & Sofía Moroni, 2012. "Dynamic Contracts Under Loss Aversion," Working Papers wp_024, Adolfo Ibáñez University, School of Government.
    9. Thomas Bauer & Holger Bonin & Lorenz Goette & Uwe Sunde, 2007. "Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Micro Data," Economic Journal, Royal Economic Society, vol. 117(524), pages 508-529, November.
    10. Christoph Knoppik & Thomas Beissinger, 2009. "Downward nominal wage rigidity in Europe: an analysis of European micro data from the ECHP 1994–2001," Empirical Economics, Springer, vol. 36(2), pages 321-338, May.
    11. Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ramírez G., 2009. "Are wages rigid in Colombia?: Empirical evidence based on a sample of wages at the firm level," Borradores de Economia 571i, Banco de la Republica de Colombia.
    12. Patrick A. Puhani, 2008. "Transatlantic Differences in Labour Markets: Changes in Wage and Non‐Employment Structures in the 1980s and the 1990s," German Economic Review, Verein für Socialpolitik, vol. 9(3), pages 312-338, August.
    13. Patrick A. Puhani, 2008. "Transatlantic Differences in Labour Markets: Changes in Wage and Non‐Employment Structures in the 1980s and the 1990s," German Economic Review, Verein für Socialpolitik, vol. 9(3), pages 312-338, August.
    14. Agell, Jonas & Bennmarker, Helge, 2002. "Wage Policy and Endogenous Wage Rigidity: A Representative View from the Inside," Research Papers in Economics 2002:12, Stockholm University, Department of Economics.
    15. Knoppik, Christoph, 2004. "The Kernel-Location Approach - A New Non-parametric Approach to the Analysis of Download Nominal Rigidity in Micro Data," University of Regensburg Working Papers in Business, Economics and Management Information Systems 392, University of Regensburg, Department of Economics.
    16. Radowski, Daniel & Bonin, Holger, 2008. "Sectoral differences in wage freezes and wage cuts: evidence from a new firm survey," Discussion Paper Series 1: Economic Studies 2008,24, Deutsche Bundesbank.
    17. Francesco Devicienti, 2002. "Downward Nominal Wage Rigidity in Italy: Evidence and Consequences," LABORatorio R. Revelli Working Papers Series 20, LABORatorio R. Revelli, Centre for Employment Studies.
    18. von Hagen, Jurgen & Hofmann, Boris, 2004. "Macroeconomic implications of low inflation in the euro area," The North American Journal of Economics and Finance, Elsevier, vol. 15(1), pages 5-23, March.
    19. repec:zbw:rwidps:0012 is not listed on IDEAS

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