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How strong is the case for downward real wage rigidity?

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  • Steinar Holden
  • Fredrik Wulfsberg

Abstract

This paper explores the existence of downward real wage rigidity (DRWR) in 19 OECD countries, over the period 1973-1999, using data for hourly nominal earnings at the industry level. Based on a nonparametric statistical method, which allows for country- and year-specific variation in both the median and the dispersion of industry wage changes, we find evidence of some DRWR in OECD countries overall, as well as for specific geographical regions and time periods. There is some evidence that real wage cuts are less prevalent in countries with strict employment protection legislation and high union density. Generally, we find stronger evidence for downward nominal wage rigidity than for downward real wage rigidity.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 07-6.

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Date of creation: 2007
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Handle: RePEc:fip:fedbwp:07-6

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Keywords: Wages;

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Citations

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Cited by:
  1. Patrick Lünnemann & Ladislav Wintr, 2010. "Downward wage rigidity and automatic wage indexation: Evidence from monthly micro wage data," BCL working papers 48, Central Bank of Luxembourg.
  2. Lars Calmfors & Anna Larsson, 2011. "Pattern Bargaining and Wage Leadership in a Small Open Economy," CESifo Working Paper Series 3510, CESifo Group Munich.
  3. Steinar Holden & Fredrik Wulfsberg, 2009. "Wage rigidity, institutions, and inflation," Working Paper 2009/02, Norges Bank.

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