How Rigid Are Nominal-Wage Rates?

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How Rigid Are Nominal-Wage Rates?

Author Info

Allan Crawford

Abstract

This study examines the effect of nominal-wage rigidities on wage growth in Canada using a hazard model and micro data for union contracts. The hazard model is specified in a way that allows considerable flexibility in the shape of the estimated notional wage-change distribution. This notional distribution is compared with the observed distribution to estimate the net effect of downward nominal-wage rigidity and menu costs on wage growth. Estimates from alternative versions of the model suggest that the net effect on the average annual growth rate of wages was in the range of 0.10 to 0.18 percentage points in the unionized private sector during the low-inflation period of the 1990s.

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Publisher Info
Paper provided by Bank of Canada in its series Working Papers with number 01-8.

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Length: 37 pages
Date of creation: 2001
Date of revision:
Handle: RePEc:bca:bocawp:01-8

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Find related papers by JEL classification:
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
E61 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Policy Objectives; Policy Designs and Consistency; Policy Coordination

This paper has been announced in the following NEP Reports:

NEP-ALL-2001-08-30 (All new papers)
NEP-LAB-2001-08-30 (Labour Economics)
NEP-LTV-2001-08-30 (Unemployment, Inequality & Poverty)
NEP-PBE-2001-08-30 (Public Economics)

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This page was last updated on 2009-11-24.

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