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On Sand and the Role of Grease in Labor Markets

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  • Jörg Decressin
  • Anja Decressin
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    Abstract

    This paper investigates wage setting in (west) Germany using the German Socioeconomic Panel dataset on individuals and compares the findings with those available for the United Kingdom and the United States. The fraction of job stayers in (west) Germany who suffer unchanged wages or wage cuts compares with that in similar data for the Anglo-American countries, even after various adjustments for potential reporting errors. While nominal wages of job stayers are rigid downward, real wages are not. Nevertheless, the macroeconomic effects of the nominal rigidity are limited and cannot be weakened substantially by raising inflation.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/164.

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    Length: 37
    Date of creation: 01 Sep 2002
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/164

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    1. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 100(2), pages 529-38, May.
    2. Bound, John & Krueger, Alan B, 1991. "The Extent of Measurement Error in Longitudinal Earnings Data: Do Two Wrongs Make a Right?," Journal of Labor Economics, University of Chicago Press, University of Chicago Press, vol. 9(1), pages 1-24, January.
    3. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, Elsevier, vol. 34(3), pages 383-414, December.
    4. Burda, Michael C. & Mertens, Antje, 2001. "Estimating wage losses of displaced workers in Germany," Labour Economics, Elsevier, Elsevier, vol. 8(1), pages 15-41, January.
    5. Erica L. Groshen & Mark E. Schweitzer, 1999. "Firms' wage adjustments: a break from the past?," Working Paper 9908, Federal Reserve Bank of Cleveland.
    6. David Card & Dean Hyslop, 1996. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Working Papers 5538, National Bureau of Economic Research, Inc.
    7. David E. Lebow & David J. Stockton & William L. Wascher, 1995. "Inflation, nominal wage rigidity, and the efficiency of labor markets," Finance and Economics Discussion Series, Board of Governors of the Federal Reserve System (U.S.) 95-45, Board of Governors of the Federal Reserve System (U.S.).
    8. Grund, Christian, 1999. "Stigma effects of layoffs?: Evidence from German micro-data," Economics Letters, Elsevier, Elsevier, vol. 64(2), pages 241-247, August.
    9. Stephen Nickell & Glenda Quintini, 2001. "Nominal Wage Rigidity and the Rate of Inflation," CEP Discussion Papers, Centre for Economic Performance, LSE dp0489, Centre for Economic Performance, LSE.
    10. Eswar Prasad, 2000. "The Unbearable Stability of the German Wage Structure," IMF Working Papers 00/22, International Monetary Fund.
    11. Joseph G. Altonji & Paul J. Devereux, 1999. "The Extent and Consequences of Downward Nominal Wage Rigidity," NBER Working Papers 7236, National Bureau of Economic Research, Inc.
    12. Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 1-92.
    13. Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 110(462), pages C176-95, March.
    14. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
    15. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
    16. Jerry Hausman, 2001. "Mismeasured Variables in Econometric Analysis: Problems from the Right and Problems from the Left," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 15(4), pages 57-67, Fall.
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    Cited by:
    1. 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).
    2. Athanasios Vamvakidis, 2009. "Regional Wage Differentiation and Wage Bargaining Systems in the European Union," Financial Theory and Practice, Institute of Public Finance, Institute of Public Finance, vol. 33(1), pages 73-87.
    3. von Hagen, Jurgen & Hofmann, Boris, 2004. "Macroeconomic implications of low inflation in the euro area," The North American Journal of Economics and Finance, Elsevier, Elsevier, vol. 15(1), pages 5-23, March.
    4. Thomas Beissinger & Chritoph Knoppik, 2005. "Sind Nominallöhne starr? Neuere Evidenz und wirtschaftspolitische Implikationen," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, Verein für Socialpolitik, vol. 6(2), pages 171-188, 05.

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