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Price, wage and employment response to shocks: evidence from the WDN Survey

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Author Info

  • Giuseppe Bertola

    ()
    (Università Di Torino)

  • Aurelijus Dabusinskas

    ()
    (Eesti Pank)

  • Marco Hoeberichts

    ()
    (De Nederlandsche Bank)

  • Mario Izquierdo

    ()
    (Banco de España)

  • Claudia Kwapil

    ()
    (Oesterreichische Nationalbank)

  • Jeremi Montornès

    ()
    (Banque de France)

  • Daniel Radowski

    ()
    (Deutsche Bundesbank)

Abstract

This paper analyses information from survey data collected in the framework of the Eurosystem’s Wage Dynamics Network (WDN) on patterns of firm-level adjustment to shocks. We document that the relative intensity and the character of price vs. cost and wage vs. employment adjustments in response to cost-push shocks depend — in theoretically sensible ways — on the intensity of competition in firms’ product markets, on the importance of collective wage bargaining and on other structural and institutional features of firms and of their environment. Focusing on the pass-through of cost shocks to prices, our results suggest that the pass-through is lower in highly competitive firms. Furthermore, a high degree of employment protection and collective wage agreements tend to make this pass through stronger.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/10/Fic/dt1006e.pdf
File Function: First version, April 2010
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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1006.

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Length: 36 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:bde:wpaper:1006

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Keywords: Wage bargaining; Labour-market institutions; Survey data; European Union;

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  1. Galuščák, Kamil & Keeney, Mary & Nicolitsas, Daphne & Smets, Frank & Strzelecki, Pawel & Vodopivec, Matija, 2010. "The determination of wages of newly hired employees: survey evidence on internal versus external factors," Working Paper Series 1153, European Central Bank.
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  3. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
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  14. Silvia Fabiani & Martine Druant & Ignacio Hernando & Claudia Kwapil & Bettina Landau & Claire Loupias & Fernando Martins & Thomas Mathä & Roberto Sabbatini & Harald Stahl & Ad Stokman, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
  15. Torben Andersen & Jan Skaksen, 2007. "Labour Demand, Wage Mark-ups and Product Market Integration," Journal of Economics, Springer, vol. 92(2), pages 103-135, October.
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