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Downward Nominal Wage Rigidity in Italy: Evidence and Consequences

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  • Francesco Devicienti

Abstract

This paper uses administrative longitudinal micro-data from the Italian Social Security Institute (INPS) to estimate the extent of downward nominal wage rigidity. The determinants of wage changes are explicitly modelled, as is the measurement error deriving from the fact that earnings inclusive of benefits, not hourly wages, are available in the data. Estimates show that the degree of downward nominal wage rigidity is medium/high – between 51% and 68% of all notional wage cuts being prevented by the existence of proportional rigidity. The implications of the estimated nominal wage rigidity for the real side of the economy are also explored.

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Bibliographic Info

Paper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 20.

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Length: 58 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:cca:wplabo:20

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Related research

Keywords: Nominal wage rigidity; measurement error; proportional and threshold rigidity models; natural unemployment rate.;

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References

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Citations

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Cited by:
  1. Francesco Devicienti & Agata Maida & Paolo Sestito, 2007. "Downward Wage Rigidity in Italy: Micro-Based Measures and Implications," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(524), pages F530-F552, November.
  2. Thomas Beissinger & Chritoph Knoppik, 2005. "Sind Nominallöhne starr? Neuere Evidenz und wirtschaftspolitische Implikationen," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 6(2), pages 171-188, 05.
  3. Cornelissen, Thomas & Hübler, Olaf, 2005. "Downward Wage Rigidity and Labour Mobility," IZA Discussion Papers 1523, Institute for the Study of Labor (IZA).
  4. Steinar Holden, 2004. "Wage Formation under Low Inflation," CESifo Working Paper Series 1252, CESifo Group Munich.
  5. Bläs, Barno, 2006. "Ausmaß und reale Konsequenzen nach unter starrer Nominallöhne. Eine Untersuchung für den deutschen Arbeitsmarkt," University of Regensburg Working Papers in Business, Economics and Management Information Systems 416, University of Regensburg, Department of Economics.
  6. Thomas Beissinger & Christoph Knoppik, 2006. "Downward Nominal Wage Rigidity in Europe: An Analysis of European Micro Data from the ECHP 1994-2001," Diskussionspapiere aus dem Institut für Volkswirtschaftslehre der Universität Hohenheim, Department of Economics, University of Hohenheim, Germany 275/2006, Department of Economics, University of Hohenheim, Germany.
  7. Isabella David, 2009. "Composition Bias and Italian Wage Rigidities over the Business Cycle," LABORatorio R. Revelli Working Papers Series, LABORatorio R. Revelli, Centre for Employment Studies 92, LABORatorio R. Revelli, Centre for Employment Studies.

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