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Downward Wage Regidity for Different Workers and Firms

  • Philip Du Caju
  • Catherine Fuss
  • Ladislav Wintr

This paper evaluates the extent of downward nominal and real wage rigidity for differentcategories of workers and firms using the methodology developed by the International WageFlexibility Project (IWFP). The analysis is based on an administrative data set on individualearnings, covering one-third of employees of the private sector in Belgium over the period1990-2002. Our results show that Belgium is characterised by strong real wage rigidity and verylow nominal wage rigidity, consistent with the typical wage formation system of full indexation.Real rigidity is stronger for white-collar workers than for blue-collar workers. Real rigiditydecreases with age and wage level. Wage rigidity appears to be lower in firms experiencingdownturns. Finally, smaller firms and firms with lower job quit rates appear to have more rigidwages. Our results are in line with standard labour market theories and are robust to alternativemeasures of wage rigidity.

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Article provided by ULB -- Universite Libre de Bruxelles in its journal Brussels economic review.

Volume (Year): 55 (2012)
Issue (Month): 1 ()
Pages: 5-32

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Handle: RePEc:bxr:bxrceb:2013/130010
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