Some Evidence on the Importance of Sticky Wages
AbstractNominal wage stickiness is an important component of recent medium-scale structural macroeconomic models, but to date there has been little microeconomic evidence supporting the assumption of sluggish nominal wage adjustment. We present evidence on the frequency of nominal wage adjustment using data from the Survey of Income and Program Participation (SIPP) for the period 1996-1999. The SIPP provides high-frequency information on wages, employment and demographic characteristics for a large and representative sample of the US population. The main results of the analysis are as follows. 1) After correcting for measurement error, wages appear to be very sticky. In the average quarter, the probability that an individual will experience a nominal wage change is between 5 and 18 percent, depending on the samples and assumptions used. 2) The frequency of wage adjustment does not display significant seasonal patterns. 3) There is little heterogeneity in the frequency of wage adjustment across industries and occupations. 4) The hazard of a nominal wage change first increases and then decreases, with a peak at 12 months. 5) The probability of a wage change is positively correlated with the unemployment rate and with the consumer price inflation rate.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 16130.
Date of creation: Jun 2010
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- Alessandro Barattieri & Susanto Basu & Peter Gottschalk, 2010. "Some evidence on the importance of sticky wages," Working Papers 10-11, Federal Reserve Bank of Boston.
- Barattieri, Alessandro & Basu, Susanto & Gottschalk, Peter T., 2010. "Some Evidence on the Importance of Sticky Wages," IZA Discussion Papers 5039, Institute for the Study of Labor (IZA).
- Alessandro Barattieri & Susanto Basu & Peter Gottschalk, 2010. "Some Evidence on the Importance of Sticky Wages," Boston College Working Papers in Economics 740, Boston College Department of Economics.
- E24 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
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- Del Negro, Marco & Schorfheide, Frank, 2007.
"Forming Priors for DSGE Models (and How It Affects the Assessment of Nominal Rigidities),"
CEPR Discussion Papers
6119, C.E.P.R. Discussion Papers.
- Del Negro, Marco & Schorfheide, Frank, 2008. "Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1191-1208, October.
- Marco Del Negro & Frank Schorfheide, 2006. "Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)," Working Paper 2006-16, Federal Reserve Bank of Atlanta.
- Marco Del Negro & Frank Schorfheide, 2008. "Forming Priors for DSGE Models (and How it Affects the Assessment of Nominal Rigidities)," NBER Working Papers 13741, National Bureau of Economic Research, Inc.
- Frank Schorfheide & Marco Del Negro, 2007. "Forming Priors for DSGE Models (and How It Affects the Assessment of Nominal Rigidities)," 2007 Meeting Papers 283, Society for Economic Dynamics.
- Marco Del Negro & Frank Schorfheide, 2008. "Forming priors for DSGE models (and how it affects the assessment of nominal rigidities)," Staff Reports 320, Federal Reserve Bank of New York.
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