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Non-parametric identification of the extent of downward wage rigidities

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  • Paris Nearchou

Abstract

We study the problem of identification of measures of the extent of individual types of downward wage rigidity from micro-level data on nominal wage growth rates, in the context of a wage adjustment process that may feature any number such rigidity types. For that purpose we develop a comprehensive framework for the modelling and measurement of wage rigidities in general. We show that the presence of measurement error does not alter fundamentally the nature of this identification problem, and develop an identification strategy that is applicable with measurement-error-free and measurement-error-contaminated data. This relies on weaker restrictions than those usually employed in the literature, including being non-parametric.

Suggested Citation

  • Paris Nearchou, 2018. "Non-parametric identification of the extent of downward wage rigidities," University of Cyprus Working Papers in Economics 18-2018, University of Cyprus Department of Economics.
    • Handle: RePEc:ucy:cypeua:18-2018
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    File URL: https://papers.econ.ucy.ac.cy/RePEc/papers/18-18.pdf
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    More about this item

    Keywords

    downward wage rigidity; identification; censoring; measurement error;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

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