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Rigid labour compensation and flexible employment? Firm-level evidence with regard to productivity for Belgium

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  • Fuss, Catherine
  • Wintr, Ladislav

Abstract

Using firm-level data for Belgium over the period 1997-2005, we evaluate the elasticity of firms' labour and real average labour compensation to microeconomic total factor productivity (TFP). Our results may be summarised as follows. First, we find that the elasticity of average labour compensation to firm-level TFP is very low contrary to that of labour, consistent with real wage rigidity. Second, while the elasticity of average labour compensation to idiosyncratic firm- level TFP is close to zero, the elasticity with respect to aggregate sector-level TFP is high. We argue that average labour compensation adjustment mainly occur at the sector level through sectoral collective bargaining, which leaves little room for firm-level adjustment to firm-specific shocks. Third, we report evidence of a positive relationship between hours and idiosyncratic TFP, as well as aggregate TFP within the year. JEL Classification: J30, J60

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Bibliographic Info

Paper provided by European Central Bank in its series Working Paper Series with number 1021.

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Date of creation: Mar 2009
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Handle: RePEc:ecb:ecbwps:20091021

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Keywords: Employment; hours; labour compensation; total factor productivity;

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Cited by:
  1. Maritza López-Novella & Salimata Sissoko, 2009. "Working Paper 12-09 - Salaires et négociation collective en Belgique : une analyse microéconomique en panel," Working Papers 0912, Federal Planning Bureau, Belgium.
  2. Loupias, C. & Sevestre, P., 2010. "Costs, demand, and producer price changes," Working papers 273, Banque de France.
  3. Emin Dinlersoz & Henry Hyatt & Sang Nguyen, 2011. "Wage Dynamics along the Life-Cycle of Manufacturing Plants," Working Papers 11-24r, Center for Economic Studies, U.S. Census Bureau, revised Mar 2013.

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