This paper reviews several methods to measure wage flexibility, and their suitability for evaluating the extent of such flexibility during times of structural change, when wage distributions and wage curves can be particularly volatile. The paper uses nonparametric estimation to capture possible nonlinearities in the wage curve and relaxes the assumption of a stable wage distribution over time by linking the shape of the wage change distribution to macroeconomic variables. The proposed methodology is applied to Polish micro data. The estimates confirm that wages are less elastic in a high-unemployment/low-wage environment. Based on a comparison of actual and counterfactual wage distributions, the effects of nominal wage rigidities on real wages, and thus, on the labor market and the real economy, were limited until 1998, but have been quite significant thereafter.
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Paper provided by International Monetary Fund in its series IMF Working Papers with number
05/134.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
David Card, 1995.
"The Wage Curve: A Review,"
Working Papers
722, Princeton University, Department of Economics, Industrial Relations Section..
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