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Are Wages Rigid? The Case of France in The Late 1990s

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  • Pierre Biscourp

    (INSEE)

  • Orietta Dessy

    (Bocconi University)

  • Nathalie Fourcade

    (DGTPE)

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    Abstract

    Wages are rigid if they vary less than they should because some mechanisms prevent them from changing, especially decreasing. Empirical tests of downward rigidities are not robust. They are based on ad-hoc assumptions regarding the shape that the distribution of wage variations would have if the wage rigidities were absent. An analysis made for France based on four sources of information on full-time wages in the market sector suggests that the application of these tests to household survey data greatly overestimates wage rigidity. We use reputedly reliable sources to show that wages were highly variable in France in the late 1990s. Every year, wages fell for 20% to 30% of employees. Zero variations from one year to the next were rare. However, basic wage variations, excluding bonuses, displayed characteristics compatible with the presence of rigidities. Wage variability is therefore posited to be partly due to the variability of bonuses.

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    Bibliographic Info

    Article provided by Institut National de la Statistique et des Etudes Economiques in its journal Economie et Statistique.

    Volume (Year): 386 (2006)
    Issue (Month): (March)
    Pages: 59-89

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    Handle: RePEc:crs:ecosta:es386c

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    Related research

    Keywords: Wage Rigidity; Measurement Errors;

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    8. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    9. David Card & Francis Kramarz & Thomas Lemieux, 1999. "Changes in the Relative Structure of Wages and Employment: A Comparison of the United States, Canada, and France," Canadian Journal of Economics, Canadian Economics Association, vol. 32(4), pages 843-877, August.
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