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Nominal Wage Rigidity in Australia

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Author Info

  • Jacqueline Dwyer

    ()
    (Reserve Bank of Australia )

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    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 Using a unique and unpublished microdata set, we find strong evidence of downward nominal wage rigidity.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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    Related research

    Keywords: Macroeconomics; employment; unemployment; wags; wage indexation Wages; compensation; and labor costs: general;

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    Cited by:
    1. 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.
    2. Daniel Dias & Carlos Robalo Marques & Fernando Martins, 2012. "Wage rigidity and employment adjustment at the firm level: evidence from survey data," Working Papers w201212, Banco de Portugal, Economics and Research Department.
    3. Fernando Martins, 2013. "Survey evidence on price and wage rigidities in Portugal," Working Papers w201312, Banco de Portugal, Economics and Research Department.

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