Advanced Search
MyIDEAS: Login

Wage rigidity, institutions, and inflation

Contents:

Author Info

  • Steinar Holden

    () (University of Oslo, Norges Bank (Central Bank of Norway)and CESifo Department of Economics, University of Oslo)

  • Fredrik Wulfsberg

    () (Norges Bank (Central Bank of Norway))

Abstract

A number of recent studies have documented extensive downward nominal wage rigidity (DNWR) for job stayers in many OECD countries. However, DNWR for individual workers may induce downward rigidity or "a floor" for the aggregate wage growth at positive or negative levels. Aggregate wage growth may be below zero because of compositional effects, for example that old, high-wage workers are replaced by young low-wage workers. DNWR may also lead to a positive growth in aggregate wages because of changes in relative wages. We explore industry data for 19 OECD countries, over the period 1971-2006. We find evidence for floors on nominal wage growth at 6 percent and lower in the 1970s and 1980s, at one percent in the 1990s, and at 0.5 percent in the 2000s. Furthermore, we find that DNWR is stronger in country-years with strict employment protection legislation, high union density, centralised wage setting and high inflation.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.norges-bank.no/en/about/published/publications/working-papers/2009/wp-20092/
Download Restriction: no

Bibliographic Info

Paper provided by Norges Bank in its series Working Paper with number 2009/02.

as in new window
Length: 39 pages
Date of creation: 27 Jan 2009
Date of revision:
Handle: RePEc:bno:worpap:2009_02

Contact details of provider:
Postal: Postboks 1179 Sentrum, 0107 Oslo
Phone: +47 22 31 60 00
Fax: +47 22 41 31 05
Email:
Web page: http://www.norges-bank.no/
More information through EDIRC

Related research

Keywords: Wage inflation; downward nominal wage rigidity; OECD; wage setting;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Stephen Nickell & Glenda Quintini, 2003. "Nominal wage rigidity and the rate of inflation," Economic Journal, Royal Economic Society, vol. 113(490), pages 762-781, October.
  2. Holden, S., 1998. "Wage Drift and the Relevance of Centralised Wage Setting," Memorandum 04/1998, Oslo University, Department of Economics.
  3. David Card & Dean Hyslop, 1996. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Working Papers 5538, National Bureau of Economic Research, Inc.
  4. Christoph Knoppik & Thomas Beissinger, 2009. "Downward nominal wage rigidity in Europe: an analysis of European micro data from the ECHP 1994–2001," Empirical Economics, Springer, vol. 36(2), pages 321-338, May.
  5. Steinar Holden & Fredrik Wulfsberg, 2008. "Downward Nominal Wage Rigidity in the OECD," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 15.
  6. Bauer, Thomas K. & Bonin, Holger & Sunde, Uwe, 2003. "Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Micro Data," IZA Discussion Papers 959, Institute for the Study of Labor (IZA).
  7. George A. Akerlof & William T. Dickens & George L. Perry, 2000. "Near-Rational Wage and Price Setting and the Long-Run Phillips Curve," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(1), pages 1-60.
  8. Mikael Carlsson & Andreas Westermark, 2008. "Monetary Policy under Downward Nominal Wage Rigidity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 28.
  9. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2007. "How wages change: micro evidence from the international wage flexibility project," Staff Reports 275, Federal Reserve Bank of New York.
  10. Knoppik, Christoph & Beissinger, Thomas, 2001. "How Rigid are Nominal Wages? Evidence and Implications for Germany," IZA Discussion Papers 357, Institute for the Study of Labor (IZA).
  11. Olivier Blanchard & Justin Wolfers, 1999. "The Role of Shocks and Institutions in the Rise of European Unemployment: The Aggregate Evidence," NBER Working Papers 7282, National Bureau of Economic Research, Inc.
  12. Philip Ducaju & Erwan Gautier & Daphné Momferatou & Mélanie Ward-Warmedinge, 2008. "Institutional features of wage bargaining in 23 European countries, the US and Japan," Working Paper Research 154, National Bank of Belgium.
  13. Holden, Steinar, 1997. "Wage Bargaining, Holdout, and Inflation," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 235-55, April.
  14. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, vol. 82(1), pages 100-121, March.
  15. Gary Solon & Robert Barsky & Jonathan A. Parker, 1992. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias," NBER Working Papers 4202, National Bureau of Economic Research, Inc.
  16. Michael W. L. Elsby, 2005. "Evaluating the Economic Significance of Downward Nominal Wage Rigidity," CEP Discussion Papers dp0704, Centre for Economic Performance, LSE.
  17. Christofides, Louis N. & Li, Dingding, 2005. "Nominal and real wage rigidity in a friction model," Economics Letters, Elsevier, vol. 87(2), pages 235-241, May.
  18. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, vol. 105(3), pages 699-726, August.
  19. Edward Nelson, 2005. "The Great Inflation of the Seventies: What Really Happened?," The B.E. Journal of Macroeconomics, De Gruyter, vol. 0(1), pages 3.
  20. David E. Lebow & Raven E. Saks & Beth Anne Wilson, 2003. "Downward Nominal Wage Rigidity: Evidence from the Employment Cost Index," The B.E. Journal of Macroeconomics, De Gruyter, vol. 0(1), pages 2.
  21. Tobin, James, 1972. "Inflation and Unemployment," American Economic Review, American Economic Association, vol. 62(1), pages 1-18, March.
  22. Moene, Karl O, 1988. "Unions' Threats and Wage Determination," Economic Journal, Royal Economic Society, vol. 98(391), pages 471-83, June.
  23. Steinar Holden & Fredrik Wulfsberg, 2007. "How strong is the case for downward real wage rigidity?," Working Papers 07-6, Federal Reserve Bank of Boston.
  24. Holden, Steinar, 1994. "Wage bargaining and nominal rigidities," European Economic Review, Elsevier, vol. 38(5), pages 1021-1039, May.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Patrick Lünnemann & Ladislav Wintr, 2010. "Downward wage rigidity and automatic wage indexation: Evidence from monthly micro wage data," BCL working papers 48, Central Bank of Luxembourg.
  2. Stefano Gnocchi & Evi Pappa, 2009. "Do labor market rigidities matter for business cycles? Yes they do," Working Papers 411, Barcelona Graduate School of Economics.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bno:worpap:2009_02

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.