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Downward Nominal Wage Rigidity in Europe

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Author Info

  • Holden, Steinar

    () (Dept. of Economics, University of Oslo)

  • Wulfsberg, Fredrik

    () (Norges Bank)

Abstract

This paper explores the existence of downward nominal wage rigidity (DNWR) in the industry sectors of 14 European countries, over the period 1973–1999, using a data set of hourly nominal wages at industry level. Based on a novel nonparametric statistical method, which allows for country and year specific variation in both the median and the dispersion of industry wage changes, we reject the hypothesis of no DNWR. The fraction of wage cuts prevented due to DNWR has fallen over time, from 70 percent in the 1970s to 20 percent in the 1990s, but the number of industries aected by DNWR has increased. Wage cuts are less likely in countries and years with high inflation, low unemployment, high union density and strict employment protection legislation.

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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 08/2004.

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Length: 33 pages
Date of creation: 31 Mar 2004
Date of revision:
Publication status: Published in B.E. Journal of Macroeconomics (Advances), 2008.
Handle: RePEc:hhs:osloec:2004_008

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Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
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Web page: http://www.oekonomi.uio.no/indexe.html
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Keywords: Downward nominal wage rigidity; European countries; employment protection legislation;

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References

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Citations

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Cited by:
  1. Victoria V. Dobrynskaya, 2008. "The Monetary and Exchange Rate Policy of the Central Bank of Russia under Asymmetrical Price Rigidity," Journal of Innovation Economics, De Boeck Université, vol. 0(1), pages 29-62.
  2. Michał Brzoza-Brzezina & Jacek Socha, 2007. "Downward nominal wage rigidity in Poland," National Bank of Poland Working Papers 41, National Bank of Poland, Economic Institute.
  3. Cornelißen, Thomas & Hübler, Olaf, 2005. "Downward Wage Rigidity and Labour Mobility," IZA Discussion Papers 1523, Institute for the Study of Labor (IZA).
  4. Steinar Holden, 2004. "Wage formation under low inflation," Working Paper 2004/14, Norges Bank.
  5. V. Bhaskar, 2002. "Asymmetric Price Adjustment: Micro-foundations and Macroeconomic Implications," Economics Discussion Papers 547, University of Essex, Department of Economics.
  6. Steinar Holden & Fredrik Wulfsberg, 2004. "Downward Nominal Wage Rigidity in Europe (new title: The costs of price stability - downward nominal wage rigidity in Europe)," CESifo Working Paper Series 1177, CESifo Group Munich.
  7. Pierpaolo Benigno & Luca Antonio Ricci, 2010. "The Inflation-Output Trade-off with Downward Wage Rigidities," NBER Working Papers 15762, National Bureau of Economic Research, Inc.
  8. Knoppik, Christoph & Beissinger, Thomas, 2005. "Downward Nominal Wage Rigidity in Europe: An Analysis of European Micro Data from the ECHP 1994-2001," IZA Discussion Papers 1492, Institute for the Study of Labor (IZA).
  9. Arpaia, Alfonso & Pichelmann, Karl, 2007. "Nominal and real wage flexibility in EMU," MPRA Paper 4364, University Library of Munich, Germany.
  10. Linzert, Tobias, 2005. "The Unemployment Inflation Trade-Off in the Euro Area," IZA Discussion Papers 1699, Institute for the Study of Labor (IZA).
  11. Andreas Behr & Ulrich Pötter, 2010. "Downward Wage Rigidity in Europe: A New Flexible Parametric Approach and Empirical Results," German Economic Review, Verein für Socialpolitik, vol. 11, pages 169-187, 05.
  12. Behr, Andreas & Pötter, Ulrich, 2005. "Downward wage rigidity in Europe: A new flexible parametric approach and empirical results," Beiträge zur angewandten Wirtschaftsforschung 14, Center of Applied Economic Research Münster (CAWM), University of Münster.
  13. Orietta DESSY, 2005. "Nominal wage rigidity in Europe: estimates and institutional causes," Departmental Working Papers 2005-09, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  14. Gottfries, Nils, 2003. "Booms and Busts in EMU," Working Paper Series 2003:29, Uppsala University, Department of Economics.
  15. Islam, Faridul & Shahbaz, Muhammad & Shabbir, Muhammad, 2011. "Phillips curve in a small open economy: A time series exploration of North Cyprus," MPRA Paper 28397, University Library of Munich, Germany.

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