William T. Dickens () (Brookings Institution) Lorenz Goette () (University of Zurich and IZA Bonn) Erica L. Groshen () (Federal Reserve Bank of New York and IZA Bonn) Steinar Holden () (University of Oslo and CESifo) Julián Messina () (European Central Bank, University of Girona, CSEF, University of Salerno and IZA Bonn) Mark E. Schweitzer () (Federal Reserve Bank of Cleveland) Jarkko Turunen () (European Central Bank) Melanie E. Ward () (European Central Bank and IZA Bonn)
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How do the complex institutions involved in wage setting affect wage changes? The International Wage Flexibility Project provides new microeconomic evidence on how wages change for continuing workers. We analyze individuals’ earnings in 31 different data sets from sixteen countries, from which we obtain a total of 360 wage change distributions. We find a remarkable amount of variation in wage changes across workers. Wage changes have a notably non-normal distribution; they are tightly clustered around the median and also have many extreme values. Furthermore, nearly all countries show asymmetry in their wage distributions below the median. Indeed, we find evidence of both downward nominal and real wage rigidities. We also find that the extent of both these rigidities varies substantially across countries. Our results suggest that variations in the extent of union presence in wage bargaining play a role in explaining differing degrees of rigidities among countries.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
2487.
Find related papers by JEL classification: E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining
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