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Survey on Wage and Price Formation of Czech Firms

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  • Jan Babecky
  • Kamil Dybczak
  • Kamil Galuscak

Abstract

Using an ad-hoc survey at the firm level, we investigate the determinants of wage and price-setting practices in Czech firms, the presence and sources of wage rigidity, and reactions of firms to hypothetical shocks. Although the evidence of downward wage rigidity is not widespread, we find particular relevance of efficiency wage models for wage rigidity, while implicit contract theory is relevant in firms employing mainly highskilled labour. The survey further suggests that prices are less rigid than wages, while the link between wage and price changes is weak. As a response to unanticipated shocks such as a demand drop, an increase in the cost of an intermediate input or a wage increase, firms mainly reduce costs by reducing non-labour costs and temporary employment.

Suggested Citation

  • Jan Babecky & Kamil Dybczak & Kamil Galuscak, 2008. "Survey on Wage and Price Formation of Czech Firms," Working Papers 2008/12, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2008/12
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    References listed on IDEAS

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    Cited by:

    1. Filip Novotny, 2015. "Profitability Life Cycle of Foreign Direct Investment and its Application to the Czech Republic," Working Papers 2015/11, Czech National Bank.
    2. Jan Babecký & Fabrizio Coricelli & Roman Horváth, 2009. "Assessing Inflation Persistence: Micro Evidence on an Inflation Targeting Economy," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 59(2), pages 102-127, June.
    3. Galuscak, Kamil & Keeney, Mary & Nicolitsas, Daphne & Smets, Frank & Strzelecki, Pawel & Vodopivec, Matija, 2012. "The determination of wages of newly hired employees: Survey evidence on internal versus external factors," Labour Economics, Elsevier, vol. 19(5), pages 802-812.
    4. Jaromir Tonner & Stanislav Tvrz & Osvald Vasicek, 2015. "Labour Market Modelling within a DSGE Approach," Working Papers 2015/06, Czech National Bank.
    5. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2009. "Formación e incrementos de salarios en Colombia: Un estudio microeconómico a partir de una encuesta a nivel de firma," Borradores de Economia 6286, Banco de la Republica.
    6. Ana Iregui & Ligia Melo & María Ramírez, 2012. "Wage Adjustment Practices and the Link between Price and Wages: Survey Evidence from Colombian Firms," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 76, pages 17-53.
    7. Jan Babecky & Kamil Galuscak & Diana Zigraiova, 2015. "Labour Market Adjustment since the Global Financial Crisis: Evidence from a Survey of Czech Firms," Research and Policy Notes 2015/01, Czech National Bank.
    8. Jan Babecky & Kamil Galuscak & Lubomir Lizal, 2011. "Firm-Level Labour Demand: Adjustment in Good Times and During the Crisis," Working Papers 2011/15, Czech National Bank.
    9. Vlastimil Cadek & Helena Rottova & Branislav Saxa, 2011. "Hedging Behaviour of Czech Exporting Firms," Working Papers 2011/14, Czech National Bank.
    10. Martin Kahanec & M. Guzi & M. Martišková & M. Paleník & F. Pertold & Z. Siebertová, 2012. "GINI Country Report: Growing Inequalities and their Impacts in the Czech Republic and Slovakia," GINI Country Reports czech_slovak, AIAS, Amsterdam Institute for Advanced Labour Studies.
    11. Martin Kahanec & Martin Guzi & Monika Martišková & Michal Paleník & Filip Pertold & Zuzana Siebertová, 2013. "GINI Country Report: The Czech Republic and Slovakia," Research Reports 7, Central European Labour Studies Institute (CELSI).
    12. Jan Brùha, 2011. "An Empirical Small Labor Market Model for the Czech Economy," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 61(5), pages 434-449, November.
    13. Aurelijus Dabu�inskas & Tairi Room, 2011. "Survey evidence on wage and price setting in Estonia," Bank of Estonia Working Papers wp2011-06, Bank of Estonia, revised 27 May 2011.
    14. Fernando Borraz & Gerardo Licandro & Daniela Sola, 2020. "Wage and price setting: new evidence from Uruguayan firms," Journal of Applied Economics, Taylor & Francis Journals, vol. 23(1), pages 560-582, January.
    15. Jan Bruha & Jiri Polansky & Jaromir Tonner & Stanislav Tvrz & Osvald Vasicek & Jan Babecky & Kamil Galuscak & Lubomir Lizal & Diana Zigraiova, 2016. "Topics in Labour Markets," Occasional Publications - Edited Volumes, Czech National Bank, edition 1, volume 14, number rb14/1 edited by Jan Babecky, January.
    16. Jan Babecky & Kamil Galuscak & Diana Zigraiova, 2017. "Wage Dynamics and Financial Performance: Evidence from Czech Firms," Working Papers 2017/14, Czech National Bank.
    17. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2010. "Incrementos y rigideces de los salarios en Colombia: Un estudio a partir de una encuesta," Revista de Economía del Rosario, Universidad del Rosario, November.
    18. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2009. "Formación e incrementos de salarios en Colombia: Un estudio microeconómico a partir de una encuesta a nivel de firma," Borradores de Economia 582, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    Downward wage rigidity; price setting; survey data; wage setting.;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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