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Endogenous Wage Rigidity

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Author Info
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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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
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Handle: RePEc:hhs:sunrpe:2003_0010

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Postal: Department of Economics, Stockholm, S-106 91 Stockholm, Sweden
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Related research
Keywords: wage rigidity survey evidence matched data reciprocity behavioral macroeconomics labor law

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Find related papers by JEL classification:
C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Microeconomic Data
E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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