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Understanding sectoral differences in downward real wage rigidity : workforce composition, institutions, technology and competition

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  • Philip Du Caju

    ()
    (National Bank of Belgium, Research Department)

  • Catherine Fuss

    ()
    (National Bank of Belgium, Research Department
    Université Libre de Bruxelles)

  • Ladislav Wintr

    ()
    (Central Bank of Luxembourg, Economics and Research Department)

Abstract

This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, competition, technology and wage-bargaining institutions. We adopt the measure of downward real wage rigidity (DRWR) developed by Dickens and Goette (2006) and rely on a large administrative matched employer-employee dataset for Belgium over the period 1990-2002. Firstly, our results indicate that DRWR is significantly higher for white-collar workers and lower for older workers and for workers with higher earnings and bonuses. Secondly, beyond labour force composition effects, sectoral differences in DRWR are related to competition, firm size, technology and wage-bargaining institutions. We find that wages are more rigid in more competitive sectors, in labour-intensive sectors, and in sectors with predominant centralised wagesetting at the sector level as opposed to firm-level wage agreements.

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Bibliographic Info

Paper provided by National Bank of Belgium in its series Working Paper Research with number 156.

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Length: 43 pages
Date of creation: Feb 2009
Date of revision:
Handle: RePEc:nbb:reswpp:200902-18

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Keywords: wage rigidity; matched employer-employee data; wage-bargaining institutions;

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References

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  1. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward nominal and real wage rigidity: survey evidence from European firms," Working Papers 110, Bank of Greece.
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Citations

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Cited by:
  1. Lünnemann, Patrick & Wintr, Ladislav, 2010. "Downward wage rigidity and automatic wage indexation: evidence from monthly micro wage data," Working Paper Series 1269, European Central Bank.
  2. Julián Messina & Philip Du Caju & Cláudia Filipa Duarte & Niels Lynggård Hansen & Mario Izquierdo, 2010. "The incidence of nominal and real wage rigidity : An individual-based sectoral approach," Working Paper Research 191, National Bank of Belgium.
  3. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward nominal and real wage rigidity: survey evidence from European firms," Working Papers 110, Bank of Greece.
  4. Marianna Cervena, 2012. "Base Wage Rigidities: Evidence From a Survey of Slovak Firms," Working and Discussion Papers WP 3/2012, Research Department, National Bank of Slovakia.
  5. Kátay, Gábor, 2011. "Downward wage rigidity in Hungary," Working Paper Series 1372, European Central Bank.
  6. Benigno Pierpaolo & Surico Paolo & Ricci Luca Antonio, 2011. "Unemployment and productivity in the long run: The role of macroeconomic volatility," wp.comunite 0085, Department of Communication, University of Teramo.
  7. Dhyne, Emmanuel & Druant, Martine, 2010. "Wages, labor or prices: how do firms react to shocks?," Working Paper Series 1224, European Central Bank.
  8. Daniel Dias & Carlos Robalo Marques & Fernando Martins, 2012. "Identifying the determinants of downward wage rigidity: some methodological considerations and new empirical evidence," Working Papers w201215, Banco de Portugal, Economics and Research Department.
  9. Druant, Martine & Fabiani, Silvia & Kezdi, Gabor & Lamo, Ana & Martins, Fernando & Sabbatini, Roberto, 2012. "Firms' price and wage adjustment in Europe: Survey evidence on nominal stickiness," Labour Economics, Elsevier, vol. 19(5), pages 772-782.

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