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Firms' price and wage adjustment in Europe: Survey evidence on nominal stickiness

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  • Druant, Martine
  • Fabiani, Silvia
  • Kezdi, Gabor
  • Lamo, Ana
  • Martins, Fernando
  • Sabbatini, Roberto

Abstract

This paper presents new evidence on the patterns of price and wage adjustment in European firms and on the extent of nominal rigidities. It uses a unique dataset collected through a firm-level survey conducted in 17 European countries and covering various sectors. Several conclusions are drawn from this evidence. Firms adjust wages less frequently than prices, on average every 15 and 10months, respectively. Price and, especially, wage adjustment exhibit a substantial degree of time-dependence. In particular, wage changes tend to cluster at a specific time of the year, mostly January in the majority of countries. The results of a multivariate analysis indicate that prices are more flexible when competitive pressures in product markets are strong and when labor costs account for a lower fraction of firms' total costs, whereas wages are more flexible when bargaining is decentralized and when the coverage of collective bargaining and the stringency of employment protection legislation are low. Price rigidities are higher in firms with a larger share of high-skilled/white-collar workers.

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Bibliographic Info

Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 19 (2012)
Issue (Month): 5 ()
Pages: 772-782

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Handle: RePEc:eee:labeco:v:19:y:2012:i:5:p:772-782

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Web page: http://www.elsevier.com/locate/labeco

Related research

Keywords: Wage rigidity; Price rigidity; Indexation; Time dependence; Labor market institutions; Survey;

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Citations

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Cited by:
  1. Fernando Martins, 2013. "Survey evidence on price and wage rigidities in Portugal," Working Papers w201312, Banco de Portugal, Economics and Research Department.
  2. Giuseppe Bertola & Aurelijus Dabušinskas & Marco Hoeberichts & Mario Izquierdo & Claudia Kwapil & Jérémi Montornès & Daniel Radowski, 2010. "Price, wage and employment response to shocks : evidence from the WDN survey," Bank of Estonia Working Papers wp2010-07, Bank of Estonia, revised 26 May 2010.
  3. Ahmed, Waqas & Choudhary, M. Ali & Khan, Sajawal & Naeem, Saima & Zoega, Gylfi, 2014. "Determinants of wage stickiness in a developing economy," Economic Modelling, Elsevier, vol. 38(C), pages 296-304.
  4. Knell, Markus, 2010. "Nominal and real wage rigidities. In theory and in Europe," Working Paper Series 1180, European Central Bank.
  5. Fève, Patrick & Sahuc, Jean-Guillaume, 2013. "On the Size of the Government Spending Multiplier in the Euro Area," IDEI Working Papers 776, Institut d'Économie Industrielle (IDEI), Toulouse, revised Nov 2013.
  6. 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.
  7. Flückiger, Matthias & Ludwig, Markus, 2013. "Chinese Export Competition, Declining Exports and Adjustments at the Industry and Regional Level in Europe," MPRA Paper 48878, University Library of Munich, Germany.

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