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Downward wage rigidity for different workers and firms - an evaluation for Belgium using the IWFP procedure

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Author Info
Philip Du Caju () (Research Department, National Bank of Belgium, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.)
Catherine Fuss () (Research Department, National Bank of Belgium, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.)
Ladislav Wintr () (Research Department, National Bank of Belgium, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.)

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Abstract

This paper evaluates the extent of downward nominal and real wage rigidity for different categories of workers and firms using the methodology recently developed by the International Wage Flexibility Project (Dickens and Goette, 2006). The analysis is based on an administrative data set on individual earnings, covering one-third of employees of the private sector in Belgium over the period 1990-2002. Our results show that Belgium is characterised by strong real wage rigidity and very low nominal wage rigidity, consistent with the Belgian wage formation system of full indexation. Real rigidity is stronger for white-collar workers than for blue-collar workers. Real rigidity decreases with age and wage level. Wage rigidity appears to be lower in firms experiencing downturns. Finally, smaller firms and firms with lower job quit rates appear to have more rigid wages. Our results are robust to alternative measures of rigidity. JEL Classification: J31.

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Paper provided by European Central Bank in its series Working Paper Series with number 840.

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Length: 46 pages
Date of creation: Dec 2007
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Handle: RePEc:ecb:ecbwps:20070840

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Related research
Keywords: Wage rigidity; matched employer-employee data.;

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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. Catherine Fuss, 2008. "How do firms adjust their wage bill in Belgium ? A decomposition along the intensive and extensive margins," Research series 200801-31, National Bank of Belgium. [Downloadable!]
    Other versions:
  2. Marcus Cobb & Luis Opazo, 2008. "Microeconomic Evidence of Nominal Wage Rigidity in Chile," Working Papers Central Bank of Chile 496, Central Bank of Chile. [Downloadable!]
  3. Du Caju, Philip & Rycx, Francois & Tojerow, Ilan, 2008. "Rent-Sharing and the Cyclicality of Wage Differentials," IZA Discussion Papers 3844, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
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