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Downward Wage Regidity for Different Workers and Firms

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  • Philip Du Caju
  • Catherine Fuss
  • Ladislav Wintr

Abstract

This paper evaluates the extent of downward nominal and real wage rigidity for differentcategories of workers and firms using the methodology developed by the International WageFlexibility Project (IWFP). The analysis is based on an administrative data set on individualearnings, covering one-third of employees of the private sector in Belgium over the period1990-2002. Our results show that Belgium is characterised by strong real wage rigidity and verylow nominal wage rigidity, consistent with the typical wage formation system of full indexation.Real rigidity is stronger for white-collar workers than for blue-collar workers. Real rigiditydecreases with age and wage level. Wage rigidity appears to be lower in firms experiencingdownturns. Finally, smaller firms and firms with lower job quit rates appear to have more rigidwages. Our results are in line with standard labour market theories and are robust to alternativemeasures of wage rigidity.

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Bibliographic Info

Article provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.

Volume (Year): 55 (2012)
Issue (Month): 1 ()
Pages: 5-32

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Handle: RePEc:bxr:bxrceb:2013/130010

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Related research

Keywords: wage ridigity; matched employer-employee data;

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Cited by:
  1. Philip Du Caju & Theodora Kosma & Martina Lawless & Julian Messina & Tairi Room, 2014. "Why firms avoid cutting wages: survey evidence from European firms," Working Papers 173, Bank of Greece.
  2. Caju, P. Du & Fuss, C. & Wintr, L., 2012. "Sectoral differences in downward real wage rigidity: workforce composition, institutions, technology and competition," Journal for Labour Market Research, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany], vol. 45(1), pages 7-22.
  3. Druant, Martine & Fabiani, Silvia & Kezdi, Gabor & Lamo, Ana & Martins, Fernando & Sabbatini, Roberto, 2012. "Firms' price and wage adjustment in Europe: Survey evidence on nominal stickiness," Labour Economics, Elsevier, vol. 19(5), pages 772-782.
  4. Philip Du Caju & Catherine Fuss & Ladislav Wintr, 2009. "Understanding sectoral differences in downward real wage rigidity : workforce composition, institutions, technology and competition," Working Paper Research 156, National Bank of Belgium.
  5. Daniel Dias & Carlos Robalo Marques & Fernando Martins, 2013. "The determinants of downward wage rigidity: Some methodological considerations and new empirical evidence," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.

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