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Endogenous Wage Rigidity

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  • Agell, Jonas

    ()
    (Dept. of Economics, Stockholm University)

  • Bennmarker, Helge

    ()
    (Institute for Labour Market Policy Evaluation)

Abstract

We use a random survey of Swedish human resource managers to study the reasons for wage rigidity. Our findings are as follows. First, during the exceptional recession of the 1990s only 1.1 percent of workers received a wage cut. Second, much wage rigidity can be traced to behavioral mechanisms involving negative reciprocity, relative wage comparisons and money illusion. Third, the reasons for wage rigidity differ significantly between large and small establishments, and between the high- and low-end of the labor market. Fourth, there are significant empirical complementarities between efficiency wage mechanisms and worker bargaining strength, and between “exogenous” institutions and endogenous sources of wage rigidity. Fifth, external pay comparisons are a more important source of rigidity in highly unionized establishments. Sixth, there are significant gender differences in pay bargaining and work moral.

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Bibliographic Info

Paper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2003:10.

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Length: 40 pages
Date of creation: 21 Aug 2003
Date of revision:
Handle: RePEc:hhs:sunrpe:2003_0010

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
Phone: +46 8 16 20 00
Fax: +46 8 16 14 25
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Web page: http://www.ne.su.se/
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Related research

Keywords: wage rigidity; survey evidence; matched data; reciprocity; behavioral macroeconomics; labor law;

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References

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Cited by:
  1. Jean-Pierre Danthine & André Kurmann, 2005. "The Macroeconomic Consequences of Reciprocity in Labor Relations," Levine's Bibliography 784828000000000299, UCLA Department of Economics.
  2. Erkki Koskela & Ronnie Schöb, 2009. "A note on internal and external reference in efficiency wage models," Journal of Economics, Springer, vol. 96(1), pages 79-86, January.

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