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Nominal Wage Rigidity in Australia

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  • Jacqueline Dwyer

    ()
    (Reserve Bank of Australia )

Abstract

The existence of downward nominal wage rigidity has been used to argue against the adoption of zero inflation targets. Investigations of nominal wage flexibility in Australia have been hindered by a lack of suitable data. Using a unique and unpublished microdata set, we find strong evidence of downward nominal wage rigidity. The idea that firms are able to circumvent wage rigidity by varying broader forms of remuneration is not supported by our study. We find that these broad measures are still skewed away from pay cuts, though to a lesser extent than wages. The extent of rigidity we do observe lends support to the pursuit of small positive rates of inflation as an objective of monetary policy.

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Bibliographic Info

Article provided by Bankwest Curtin Economics Centre (BCEC), Curtin Business School in its journal Australian Journal of Labour Economics.

Volume (Year): 6 (2003)
Issue (Month): 1 (March)
Pages: 5-24

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Handle: RePEc:ozl:journl:v:6:y:2003:i:1:p:5-24

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Postal: GPO Box U1987, Perth WA 6845
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Web page: http://business.curtin.edu.au/research/publications/journals/ajle/
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Keywords: Macroeconomics; employment; unemployment; wags; wage indexation Wages; compensation; and labor costs: general;

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Cited by:
  1. Sara G. Castellanos & Rodrigo Garcia-Verdu & David S. Kaplan, 2004. "Nominal Wage Rigidities in Mexico: Evidence from Social Security Records," NBER Working Papers 10383, National Bureau of Economic Research, Inc.
  2. Brzoza-Brzezina, Michal & Socha, Jacek, 2006. "Downward nominal wage rigidity in Poland," MPRA Paper 843, University Library of Munich, Germany, revised Nov 2006.
  3. Dias, Daniel A. & Marques, Carlos Robalo & Martins, Fernando, 2013. "Wage rigidity and employment adjustment at the firm level: Evidence from survey data," Labour Economics, Elsevier, vol. 23(C), pages 40-49.
  4. Pierre Fortin & George A. Akerlof & William T. Dickens & George L. Perry, 2002. "Inflation and Unemployment in the U.S. and Canada: A Common Framework," Cahiers de recherche du Département des sciences économiques, UQAM 20-16, Université du Québec à Montréal, Département des sciences économiques.
  5. Yi-Ping Tseng, 2001. "Individuals’ Wage Changes in Australia 1997-2000," Melbourne Institute Working Paper Series wp2001n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  6. Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ramírez G., . "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.
  7. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, . "Rigideces de los salarios a la baja en Colombia: Evidencia empírica a partir de una muestra de salarios a nivel de firma," Borradores de Economia 571, Banco de la Republica de Colombia.
  8. Coleman, Simeon, 2012. "Where Does the Axe Fall? Inflation Dynamics and Poverty Rates: Regional and Sectoral Evidence for Ghana," World Development, Elsevier, vol. 40(12), pages 2454-2467.
  9. Beissinger, Thomas & Knoppik, Christoph, 2003. "Sind Nominallöhne starr? Neuere Evidenz und wirtschaftspolitische Implikationen," IZA Discussion Papers 800, Institute for the Study of Labor (IZA).
  10. Fernando Martins, 2013. "Survey evidence on price and wage rigidities in Portugal," Working Papers w201312, Banco de Portugal, Economics and Research Department.
  11. Sara Gabriela Castellanos Pascacio & Rodrigo García Verdú & David Kaplan, 2004. "Wage Rigidities in Mexico: Evidence from the Administrative Records of the Mexican Social Security Institute (Instituto Mexicano del Seguro Social)," Working Papers 2004-03, Banco de México.
  12. 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.
  13. Anne-Marie Brook & Özer Karagedikli & Dean Scrimgeour, 2002. "An optimal inflation target for New Zealand: lessons from the literature," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, September.

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