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Real and nominal wage rigidities in collective bargaining agreements

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  • Christofides, Louis N.
  • Nearchou, Paris

Abstract

An earlier study of wage agreements, reached in the Canadian unionized sector between 1976-99, found that wage adjustment is characterized by downward nominal rigidity and significant spikes at zero. We extend this earlier approach to encompass the possibility of real as well as nominal wage rigidity. The addition of real wage rigidity variables enhances earlier results and suggests that real rigidity increases significantly the mass in the histogram bin containing the mean anticipated rate of inflation, as well as in adjacent bins. Downward nominal wage rigidities and spikes at zero remain important.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 14 (2007)
Issue (Month): 4 (August)
Pages: 695-715

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Handle: RePEc:eee:labeco:v:14:y:2007:i:4:p:695-715

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  1. Bauer, Thomas & Bonin, Holger & Sunde, Uwe, 2004. "Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Microdata," CEPR Discussion Papers, C.E.P.R. Discussion Papers 4271, C.E.P.R. Discussion Papers.
  2. Stephen Nickell & Glenda Quintini, 2001. "Nominal wage rigidity and the rate of inflation," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 20131, London School of Economics and Political Science, LSE Library.
  3. Macleod, W.B. & Malcomson, J.M., 1991. "Investments, Hold Up and the Reform of Market Contracts," Cahiers de recherche, Universite de Montreal, Departement de sciences economiques 9114, Universite de Montreal, Departement de sciences economiques.
  4. Holden, S., 1989. "Wage Drift And Bargaining: Evidence From Norway," Papers, London School of Economics - Centre for Labour Economics 348, London School of Economics - Centre for Labour Economics.
  5. Holden, S., 1998. "Wage Drift and the Relevance of Centralised Wage Setting," Memorandum, Oslo University, Department of Economics 04/1998, Oslo University, Department of Economics.
  6. Holden, Steinar, 1994. "Wage bargaining and nominal rigidities," European Economic Review, Elsevier, vol. 38(5), pages 1021-1039, May.
  7. Steinar Holden, 2004. "The Costs of Price Stability: Downward Nominal Wage Rigidity in Europe," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 71(281), pages 183-208, 05.
  8. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, American Economic Association, vol. 82(1), pages 100-121, March.
  9. Louis N. Christofides & Man Tuen Leung, 2003. "Nominal Wage Rigidity in Contract Data: A Parametric Approach," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 70(280), pages 619-638, November.
  10. Louis N. Christofides & Thanasis Stengos, 2003. "Wage rigidity in Canadian collective bargaining agreements," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 56(3), pages 429-448, April.
  11. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, American Economic Association, vol. 87(5), pages 993-1008, December.
  12. Malcomson, J.M., 1997. "Contracts, hold-up and labor markets," Discussion Paper Series In Economics And Econometrics 9703, Economics Division, School of Social Sciences, University of Southampton.
  13. Joseph G. Altonji & Paul J. Devereux, 1999. "The Extent and Consequences of Downward Nominal Wage Rigidity," NBER Working Papers 7236, National Bureau of Economic Research, Inc.
  14. MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, American Economic Association, vol. 83(4), pages 811-37, September.
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Cited by:
  1. Thomas Beissinger & Christoph Knoppik, 2006. "Downward Nominal Wage Rigidity in Europe: An Analysis of European Micro Data from the ECHP 1994-2001," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim, Department of Economics, University of Hohenheim, Germany 275/2006, Department of Economics, University of Hohenheim, Germany.
  2. Giulio Fella, 2012. "Matching, Wage Rigidities and Efficient Severance Pay," Working Papers, Queen Mary, University of London, School of Economics and Finance 698, Queen Mary, University of London, School of Economics and Finance.
  3. Patrick Lünnemann & Ladislav Wintr, 2010. "Downward wage rigidity and automatic wage indexation: Evidence from monthly micro wage data," BCL working papers 48, Central Bank of Luxembourg.

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