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The Accuracy of Firms' Wage Inflation Expectations

Author

Listed:
  • Lukas Buchheim
  • Sebastian Link
  • Sascha Möhrle

Abstract

Much of recent survey-based macroeconomic research studies firms' aggregate price inflation expectations, but little is known about their expectations of own wage inflation. This paper examines the accuracy of wage inflation expectations using novel panel survey data from German firms. By comparing forecast errors for firms' own wage inflation and consumer price index inflation, we show that wage forecasts tend to be more accurate, and forecast errors for the two variables are positively correlated. Moreover, the analysis reveals that various firm characteristics and wage-setting factors, particularly collective bargaining agreements, predict the forecast accuracy of wage inflation.

Suggested Citation

  • Lukas Buchheim & Sebastian Link & Sascha Möhrle, 2025. "The Accuracy of Firms' Wage Inflation Expectations," AEA Papers and Proceedings, American Economic Association, vol. 115, pages 261-265, May.
    • Handle: RePEc:aea:apandp:v:115:y:2025:p:261-65
    DOI: 10.1257/pandp.20251018
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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