William T. Dickens () (The Brookings Institution, Washington, D.C.) Lorenz Goette () (University of Zurich) Erica L. Groshen () (Federal Reserve Bank of New York, Institute for the Study of Labor (IZA), Bonn) Steinar Holden () (University of Oslo, Research Fellow, Center for Economic Studies--Information and Forschung Institute (CESifo), Munich) Julian Messina () (European Central Bank, Universitat de Girona, Italy) Mark E. Schweitzer () (Federal Reserve Bank of Cleveland, Ohio) Jarkko Turunen () (European Central Bank) Melanie E. Ward () (European Central Bank, Institute for the Study of Labor (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 National Bank of Belgium in its series Research series with number
200610-8.
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