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Downward Nominal Wage Rigidity in Europe

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Author Info
Steinar Holden () (Department of Economics, University of Oslo and Norges Bank)
Fredrik Wulfsberg () (Norges Bank)

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Abstract

This paper explores the existence of downward nominal wage rigidity (DNWR) in the industry sectors of 14 European countries, over the period 1973–1999, using a data set of hourly nominal wages at industry level. Based on a novel nonparametric statistical method, which allows for country and year specific variation in both the median and the dispersion of industry wage changes, we reject the hypothesis of no DNWR. The fraction of wage cuts prevented due to DNWR has fallen over time, from 70 percent in the 1970s to 20 percent in the 1990s, but the number of industries affected by DNWR has increased. Wage cuts are less likely in countries and years with high inflation, low unemployment, high union density and strict employment protection legislation.

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Publisher Info
Paper provided by Norges Bank in its series Working Paper with number 2004/5.

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Length: 33 pages
Date of creation: 29 Mar 2004
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Handle: RePEc:bno:worpap:2004_05

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Related research
Keywords: Downward nominal wage rigidity; European countries; employment protection legislation;

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Find related papers by JEL classification:
J4 - Labor and Demographic Economics - - Particular Labor Markets
C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Semiparametric and Nonparametric Methods
C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Statistical Simulation Methods
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Steinar Holden, 2004. "Wage formation under low inflation," Working Paper 2004/14, Norges Bank. [Downloadable!]
    Other versions:
  2. Tobias Linzert, 2005. "The Unemployment Inflation Trade-Off in the Euro Area," IZA Discussion Papers 1699, Institute for the Study of Labor (IZA). [Downloadable!]
  3. Arpaia, Alfonso & Pichelmann, Karl, 2007. "Nominal and real wage flexibility in EMU," MPRA Paper 4364, University Library of Munich, Germany. [Downloadable!]
    Other versions:
  4. Knoppik, Christoph & Beissinger, Thomas, 2005. "Downward Nominal Wage Rigidity in Europe: An Analysis of European Micro Data from the ECHP 1994-2001," IZA Discussion Papers 1492, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  5. Henk C. Kranendonk & Jan Bonenkamp & Johan P. Verbruggen, 2004. "A Leading Indicator for the Dutch Economy – Methodological and Empirical Revision of the CPB System," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
  6. Orietta DESSY, 2005. "Nominal wage rigidity in Europe: estimates and institutional causes," Departemental Working Papers 2005-09, Department of Economics University of Milan Italy. [Downloadable!]
  7. Cornelißen, Thomas & Hübler, Olaf, 2005. "Downward Wage Rigidity and Labour Mobility," IZA Discussion Papers 1523, Institute for the Study of Labor (IZA). [Downloadable!]
  8. Brzoza-Brzezina, Michal & Socha, Jacek, 2006. "Downward nominal wage rigidity in Poland," MPRA Paper 843, University Library of Munich, Germany, revised Nov 2006. [Downloadable!]
    Other versions:
  9. Gottfries, Nils, 2003. "Booms and Busts in EMU," Working Paper Series 2003:29, Uppsala University, Department of Economics. [Downloadable!]
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