William Dickens () (The Brookings Institution) Lorenz Goette () (University of Zurich) Erica L. Groshen () (Federal Reserve Bank of New York, and IZA) Steinar Holden () (University of Oslo, Center for Economic Studies-Information and Forschung Institute (CESifo)) Julian Messina () (CSEF, University of Salerno, and European Central Bank) Mark Schweitzer () (Federal Reserve Bank of Cleveland) Jarkko Turunen () (European Central Bank) Melanie Ward (European Central Bank, and IZA)
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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 Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy in its series CSEF Working Papers with number
171.
Length: Date of creation: 01 Jan 2007 Date of revision: Publication status: Published in Journal of Economic Perspectives, 2007, vol. 21, pages 195-214 Handle: RePEc:sef:csefwp:171
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