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Price, wage and employment response to shocks : evidence from the WDN survey

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Author Info

  • Giuseppe Bertola

    ()

  • Aurelijus Dabušinskas

    ()

  • Marco Hoeberichts

    ()

  • Mario Izquierdo

    ()

  • Claudia Kwapil

    ()

  • Jérémi Montornès

    ()

  • Daniel Radowski

    ()

Abstract

This paper analyses information from survey data collected in the framework of the Eurosystem\'s Wage Dynamics Network (WDN) on patterns of firm-level adjustment to shocks. We document that the relative intensity and the character of price vs. cost and wage vs. employment adjustments in response to cost-push shocks depend - in theoretically sensible ways - on the intensity of competition in firms\' product markets, on the importance of collective wage bargaining and on other structural and institutional features of firms and of their environment. Focusing on the pass-through of cost shocks to prices, our results suggest that the pass-through is lower in highly competitive firms. Furthermore, a high degree of employment protection and collective wage agreements tend to make this pass-through stronger

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Bibliographic Info

Paper provided by Bank of Estonia in its series Bank of Estonia Working Papers with number wp2010-07.

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Date of creation: 26 May 2010
Date of revision: 26 May 2010
Handle: RePEc:eea:boewps:wp2010-07

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Keywords: wage bargaining; labour-market institutions; survey data; European Union;

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References

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  1. Jan Babecky & Philip Du Caju & Theodora Kosma & Martina Lawless & Julian Messina & Tairi Room, 2009. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Working Papers 2009/4, Czech National Bank, Research Department.
  2. Marco Leonardi & Giovanni Pica, 2007. "Employment protection legislation and wages," Working Paper Series 778, European Central Bank.
  3. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2005. "Insurance within the Firm," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 1054-1087, October.
  4. Martine Druant & Silvia Fabiani & Gabor Kezdig & Ana Lamo & Fernando Martins & Roberto Sabbatini, 2009. "How are firms' wages and prices linked: survey evidence in Europe," Temi di discussione (Economic working papers) 725, Bank of Italy, Economic Research and International Relations Area.
  5. Gali Jordi, 1994. "Monopolistic Competition, Business Cycles, and the Composition of Aggregate Demand," Journal of Economic Theory, Elsevier, vol. 63(1), pages 73-96, June.
  6. Kamil Galuščák & Mary Keeney & Daphne Nicolitsas & Frank Smets & Pawel Strzelecki & Matija Vodopivec, 2010. "The determination of wages of newly hired employees - survey evidence on internal versus external factors," Working Paper Series 1153, European Central Bank.
  7. Torben Andersen & Jan Skaksen, 2007. "Labour Demand, Wage Mark-ups and Product Market Integration," Journal of Economics, Springer, vol. 92(2), pages 103-135, October.
  8. Leonardi, Marco & Pica, Giovanni, 2010. "Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation," IZA Discussion Papers 5335, Institute for the Study of Labor (IZA).
  9. Torben M. Andersen & Niels Haldrup & Jan Rose Sørensen, 2000. "Labour market implications of EU product market integration," Economic Policy, CEPR & CES & MSH, vol. 15(30), pages 105-134, 04.
  10. Silvia Fabiani & Martine Druant & Ignacio Hernando & Claudia Kwapil & Bettina Landau & Claire Loupias & Fernando Martins & Thomas Mathä & Roberto Sabbatini & Harald Stahl & Ad Stokman, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
  11. Ana Rute Cardoso & Miguel Portela, 2009. "Micro Foundations for Wage Flexibility: Wage Insurance at the Firm Level," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 29-50, 03.
  12. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
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Citations

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Cited by:
  1. Heiner Mikosch, 2012. "Sticky Prices, Competition and the Phillips Curve," KOF Working papers 11-294, KOF Swiss Economic Institute, ETH Zurich.
  2. Martine Druant & Silvia Fabiani & Gabor Kezdig & Ana Lamo & Fernando Martins & Roberto Sabbatini, 2009. "How are firms' wages and prices linked: survey evidence in Europe," Temi di discussione (Economic working papers) 725, Bank of Italy, Economic Research and International Relations Area.
  3. Kenn Ariga & Ryo Kambayashi, 2009. "Employment and Wage Adjustments at Firms under Distress in Japan: An Analysis Based upon a Survey," KIER Working Papers 668, Kyoto University, Institute of Economic Research.
  4. ARIGA Kenn & KAMBAYASHI Ryo, 2009. "Employment and Wage Adjustments at Firms under Distress in Japan: An analysis based upon a survey," Discussion papers 09042, Research Institute of Economy, Trade and Industry (RIETI).
  5. Patrick Lünnemann & Thomas Y. Mathä, 2011. "How do firms adjust in a crisis? Evidence from a survey among Luxembourg firms," BCL working papers 70, Central Bank of Luxembourg.
  6. Fabio Rumler, 2012. "The Pass-Through of Commodity Prices to Consumer Prices of Selected Products," Monetary Policy & the Economy, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 92-104, March.
  7. Guillermo A. Calvo & Fabrizio Coricelli & Pablo Ottonello, 2012. "The Labor Market Consequences of Financial Crises With or Without Inflation: Jobless and Wageless Recoveries," NBER Working Papers 18480, National Bureau of Economic Research, Inc.
  8. Catherine Fuss & Ladislav Wintr, 2009. "Rigid labour compensation and flexible employment? Firm-level evidence with regard to productivity for Belgium," Working Paper Series 1021, European Central Bank.
  9. Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ramírez G., . "Wage Adjustment Practices and the Link between Price and Wages: Survey Evidence from Colombian Firms," Borradores de Economia 660, Banco de la Republica de Colombia.
  10. 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.
  11. Jan Babecky & Kamil Dybczak, 2012. "Real Wage Flexibility in the European Union: New Evidence from the Labour Cost Data," Working Papers 2012/01, Czech National Bank, Research Department.
  12. Emmanuel Dhyne & Jerzy Konieczny & Fabio Rumler & Patrick Sevestre, 2009. "Price rigidity in the euro area - An assessment," European Economy - Economic Papers 380, Directorate General Economic and Monetary Affairs (DG ECFIN), European Commission.
  13. Montornès, J. & Sauner-Leroy, J-B., 2010. "Wage-setting Behavior in France: Additional Evidence from an Ad-hoc Survey," Working papers 282, Banque de France.
  14. Bergin, Adele & Kelly, Elish & McGuinness, Seamus, 2012. "Explaining Changes in Earnings and Labour Costs During the Recession," Papers EC9, Economic and Social Research Institute (ESRI).
  15. 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 006286, BANCO DE LA REPÚBLICA.

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