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Are real wages rigid downwards?

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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 real wage rigidity (drwr) in 19 oecd countries, over the period 1973–1999, using data for hourly nominal earnings at 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 downward rigidity of real wages in OECD countries overall, as well as for regions and time periods. There is some evidence that real wage cuts are less prevalent under strict employment protection legislation and high union density. Generally, we find stronger evidence for downward nominal than for downward real wage rigidity.

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Bibliographic Info

Paper provided by Oslo University, Department of Economics in its series Memorandum with number 07/2007.

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Length: 42 pages
Date of creation: 28 Mar 2007
Date of revision:
Handle: RePEc:hhs:osloec:2007_007

Contact details of provider:
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
Email:
Web page: http://www.oekonomi.uio.no/indexe.html
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Related research

Keywords: Downward real wage rigidity; OECD; employment protection legislation; wage setting;

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References

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  1. Michael W. L. Elsby, 2005. "Evaluating the economic significance of downward nominal wage rigidity," LSE Research Online Documents on Economics 19882, London School of Economics and Political Science, LSE Library.
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  5. Gary Solon & Robert Barsky & Jonathan A. Parker, 1992. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias," NBER Working Papers 4202, National Bureau of Economic Research, Inc.
  6. Danthine, Jean-Pierre & Kurmann, Andre, 2006. "Efficiency wages revisited: The internal reference perspective," Economics Letters, Elsevier, vol. 90(2), pages 278-284, February.
  7. Phelps, Edmund S, 1992. "A Review of Unemployment," Journal of Economic Literature, American Economic Association, vol. 30(3), pages 1476-90, September.
  8. Christoph Knoppik & Thomas Beissinger, 2003. "How Rigid are Nominal Wages? Evidence and Implications for Germany," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 619-641, December.
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  10. Holden, Steinar, 1998. " Wage Drift and the Relevance of Centralised Wage Setting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(4), pages 711-31, December.
  11. Steinar Holden & Fredrik Wulfsberg, 2007. "Downward Nominal Wage Rigidity in the OECD," CESifo Working Paper Series 2009, CESifo Group Munich.
  12. Holden, Steinar, 2004. "Wage formation under low inflation," Memorandum 09/2004, Oslo University, Department of Economics.
  13. Luca Nunziata, 2001. "Institutions and Wage Determination: a Multi-Country Approach," Economics Papers 2001-W29, Economics Group, Nuffield College, University of Oxford.
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Citations

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Cited by:
  1. J. Atsu Amegashie & Bazoumana Ouattara & Eric Strobl, 2007. "Moral Hazard and the Composition of Transfers: Theory with an Application to Foreign Aid," CESifo Working Paper Series 1996, CESifo Group Munich.
  2. Spruk, Rok, 2010. "Iceland's Economic and Financial Crisis: Causes, Consequences and Implications," MPRA Paper 29972, University Library of Munich, Germany.
  3. Markus Knell & Alfred Stiglbauer, 2009. "The Impact of Reference Norms on Inflation Persistence When Wages are Staggered," Working Papers 153, Oesterreichische Nationalbank (Austrian Central Bank).
  4. Harilaos Mertzanis, 2009. "Efficiency Wages, Inflation And Growth," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 34(2), pages 131-151, December.

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