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How Rigid Are Nominal-Wage Rates?

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  • Allan Crawford
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    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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    File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/02/wp01-8.pdf
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    Bibliographic 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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    Related research

    Keywords: Labour markets; Inflation targets;

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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.

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