Advanced Search
MyIDEAS: Login to save this paper or follow this series

Are Real Wages Rigid Downwards?

Contents:

Author Info

  • Steinar Holden
  • Fredrik Wulfsberg

Abstract

This paper explores the existence of downward real wage rigidity (DRWR) in 19 OECD countries, over the period 1973–1999, using data for hourly nominal earnings at industry level. Based on a nonparametric statistical method, which allows for country and year specific variation in both the median and the dispersion of industry wage changes, we find evidence of some downward rigidity of real wages in OECD countries overall, as well as for regions and time periods. There is some evidence that real wage cuts are less prevalent under strict employment protection legislation and high union density. Generally, we find stronger evidence for downward nominal than for downward real wage rigidity.

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.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2007/wp-cesifo-2007-05/cesifo1_wp1983.pdf
Download Restriction: no

Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1983.

as in new window
Length:
Date of creation: 2007
Date of revision:
Handle: RePEc:ces:ceswps:_1983

Contact details of provider:
Postal: Poschingerstrasse 5, 81679 Munich
Phone: +49 (89) 9224-0
Fax: +49 (89) 985369
Email:
Web page: http://www.cesifo.de
More information through EDIRC

Related research

Keywords: downward real wage rigidity; OECD; employment protection legislation; wage setting;

Other versions of this item:

Find related papers by JEL classification:

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. Olivier J. Blanchard & Jordi Galí, 2005. "Real wage rigidities and the New Keynesian model," Proceedings, Board of Governors of the Federal Reserve System (U.S.), Board of Governors of the Federal Reserve System (U.S.).
  2. Steinar Holden, 2004. "Wage Formation under Low Inflation," CESifo Working Paper Series 1252, CESifo Group Munich.
  3. Andrew Postlewaite & Larry Samuelson & Dan Silverman, 2001. "Consumption Commitments and Preferences for Risk," PIER Working Paper Archive 04-021, Penn Institute for Economic Research, Department of Economics, University of Pennsylvania, revised 18 May 2004.
  4. Holden, Steinar, 1997. "Wage Bargaining, Holdout, and Inflation," Oxford Economic Papers, Oxford University Press, vol. 49(2), pages 235-55, April.
  5. Stephen Nickell & Glenda Quintini, 2001. "Nominal Wage Rigidity and the Rate of Inflation," CEP Discussion Papers, Centre for Economic Performance, LSE dp0489, Centre for Economic Performance, LSE.
  6. Grubb, David B. & Jackman, Richard & Layard, Richard, 1983. "Wage rigidity and unemployment in OECD countries," European Economic Review, Elsevier, Elsevier, vol. 21(1-2), pages 11-39.
  7. Holden, S., 1989. "Wage Drift And Bargaining: Evidence From Norway," Papers, London School of Economics - Centre for Labour Economics 348, London School of Economics - Centre for Labour Economics.
  8. 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.
  9. Kahneman, Daniel & Tversky, Amos, 1979. "Prospect Theory: An Analysis of Decision under Risk," Econometrica, Econometric Society, Econometric Society, vol. 47(2), pages 263-91, March.
  10. Andrew Levin & Christopher J. Erceg & Dale W. Henderson, 1999. "Optimal Monetary Policy with Staggered Wage and Price Contracts," Computing in Economics and Finance 1999, Society for Computational Economics 1151, Society for Computational Economics.
  11. Luca Nunziata, 2001. "Institutions and Wage Determination: a Multi-Country Approach," Economics Papers 2001-W29, Economics Group, Nuffield College, University of Oxford.
  12. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie Ward, 2006. "The interaction of labor markets and inflation: analysis of micro data from the International Wage Flexibility Project," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco.
  13. Beth Anne Wilson, 1999. "Wage rigidity: a look inside the firm," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 1999-22, Board of Governors of the Federal Reserve System (U.S.).
  14. Bhaskar, V, 1990. "Wage Relativities and the Natural Range of Unemployment," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 100(400), pages 60-66, Supplemen.
  15. Holden, Steinar, 1998. " Wage Drift and the Relevance of Centralised Wage Setting," Scandinavian Journal of Economics, Wiley Blackwell, Wiley Blackwell, vol. 100(4), pages 711-31, December.
  16. Stephen Nickell & Luca Nunziata & Wolfgang Ochel & Glenda Quintini, 2001. "The Beveridge Curve, Unemployment and Wages in the OECD from the 1960s to the 1990s - Preliminary Version," CEP Discussion Papers, Centre for Economic Performance, LSE dp0502, Centre for Economic Performance, LSE.
  17. 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.
  18. Jonas Agell & Per Lundborg, . "Survey evidence on wage rigidity and unemployment: Sweden in the 1990s," EPRU Working Paper Series, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics 99-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
  19. Lebow David E & Saks Raven E & Wilson Beth Anne, 2003. "Downward Nominal Wage Rigidity: Evidence from the Employment Cost Index," The B.E. Journal of Macroeconomics, De Gruyter, De Gruyter, vol. 3(1), pages 1-30, October.
  20. Cramton, Peter C & Tracy, Joseph S, 1992. "Strikes and Holdouts in Wage Bargaining: Theory and Data," American Economic Review, American Economic Association, American Economic Association, vol. 82(1), pages 100-121, March.
  21. John C. Driscoll & Steinar Holden, 2004. "Fairness and Inflation Persistence," Journal of the European Economic Association, MIT Press, MIT Press, vol. 2(2-3), pages 240-251, 04/05.
  22. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 34(3), pages 383-414, December.
  23. Elsby, Michael W.L., 2009. "Evaluating the economic significance of downward nominal wage rigidity," Journal of Monetary Economics, Elsevier, Elsevier, vol. 56(2), pages 154-169, March.
  24. Holden, Steinar & Wulfsberg, Fredrik, 2007. "Downward nominal wage rigidity in the OECD," Working Paper Series, European Central Bank 0777, European Central Bank.
  25. Smets, Frank & Wouters, Raf, 2002. "An estimated stochastic dynamic general equilibrium model of the euro area," Working Paper Series, European Central Bank 0171, European Central Bank.
  26. 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).
  27. Phelps, Edmund S, 1992. "A Review of Unemployment," Journal of Economic Literature, American Economic Association, American Economic Association, vol. 30(3), pages 1476-90, September.
  28. 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).
  29. Danthine, Jean-Pierre & Kurmann, Andre, 2006. "Efficiency wages revisited: The internal reference perspective," Economics Letters, Elsevier, Elsevier, vol. 90(2), pages 278-284, February.
  30. Lazear, Edward P, 1990. "Job Security Provisions and Employment," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 105(3), pages 699-726, August.
  31. Ellingsen, T. & Holden, S., 1995. "Sticky Consumption and Rigid Wages," Memorandum, Oslo University, Department of Economics 21/1995, Oslo University, Department of Economics.
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. Markus Knell & Alfred Stiglbauer, 2009. "The Impact of Reference Norms on Inflation Persistence When Wages are Staggered," Working Papers, Oesterreichische Nationalbank (Austrian Central Bank) 153, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Spruk, Rok, 2010. "Iceland's Economic and Financial Crisis: Causes, Consequences and Implications," MPRA Paper 29972, University Library of Munich, Germany.
  3. J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," CESifo Working Paper Series 1996, CESifo Group Munich.
  4. Harilaos Mertzanis, 2009. "Efficiency Wages, Inflation And Growth," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, Chung-Ang Unviersity, Department of Economics, vol. 34(2), pages 131-151, December.

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:ces:ceswps:_1983. See general information about how to correct material in RePEc.

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

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.