Employment Effects Of Nominal-Wage Rigidity: An Examination Using Wage-Settlements Data
AbstractThe argument advocating a moderate level of inflation based on the downward nominal-wage rigidity (DNWR) hypothesis rests on three factors: its presence, extent, and negative impact in the labour market. This paper focuses on the employment effect of DNWR. It reviews the evidence presented by Simpson, Cameron, and Hum (1998), in light of a potential bias problem associated with their reduced-form model. We describe modifications to their employment model that aim to better isolate the effects of DNWR on employment growth. Analysis shows that empirical evidence in Simpson, Cameron, and Hum (1998) is sensitive to model specification. In contrast to Simpson, Cameron, and Hum (1998), who found—economically and statistically—significant employment costs for DNWR, in most of our specifications DNWR has no significant effect on employment growth.
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Bibliographic InfoPaper provided by Bank of Canada in its series Working Papers with number 00-14.
Length: 30 pages
Date of creation: 2000
Date of revision:
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Find related papers by JEL classification:
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
- J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
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- Castellanos, Sara G. & Garcia-Verdu, Rodrigo & Kaplan, David S., 2004.
"Nominal wage rigidities in Mexico: evidence from social security records,"
Journal of Development Economics,
Elsevier, vol. 75(2), pages 507-533, December.
- 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.
- 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 DÃ©partement des sciences Ã©conomiques, UQAM 20-16, Université du Québec à Montréal, Département des sciences économiques.
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