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Understanding sectoral differences in downward real wage rigidity - workforce composition, institutions, technology and competition

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Author Info
Philip Du Caju () (National Bank of Belgium, Research Department, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.)
Catherine Fuss () (National Bank of Belgium, Research Department, Boulevard de Berlaimont 14, B-1000 Brussels, Belgium.)
Ladislav Wintr () (Central Bank of Luxembourg, Economics and Research Department, 2 boulevard Royal, L–2983 Luxembourg, Luxembourg.)

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Abstract

This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, competition, technology and wage-bargaining institutions. We adopt the measure of downward real wage rigidity (DRWR) developed by Dickens and Goette (2006) and rely on a large administrative matched employer-employee dataset for Belgium over the period 1990-2002. Firstly, our results indicate that DRWR is significantly higher for white-collar workers and lower for older workers and for workers with higher earnings and bonuses. Secondly, beyond labour force composition effects, sectoral differences in DRWR are related to competition, firm size, technology and wage bargaining institutions. We find that wages are more rigid in more competitive sectors, in labour-intensive sectors, and in sectors with predominant centralised wage setting at the sector level as opposed to firm-level wage agreements. JEL Classification: J31.

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Paper provided by European Central Bank in its series Working Paper Series with number 1006.

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Length: 44 pages
Date of creation: Feb 2009
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Handle: RePEc:ecb:ecbwps:20091006

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Related research
Keywords: wage rigidity; matched employer-employee data; wage-bargaining institutions.;

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Cited by:
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  1. Jens Eisenschmidt & Astrid Hirsch & Tobias Linzert, 2009. "Bidding behaviour in the ECB's main refinancing operations during the financial crisis," Working Paper Series 1052, European Central Bank. [Downloadable!]
  2. Thomas Y. Mathä & Olivier Pierrard, 2009. "Search in the Product Market and the Real Business Cycle," Working Paper Series 1036, European Central Bank. [Downloadable!]
    Other versions:
  3. Luca Agnello & Ricardo M. Sousa, 2009. "The determinants of public deficit volatility," Working Paper Series 1042, European Central Bank. [Downloadable!]
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