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Downward nominal wage rigidity in Canada: Evidence from micro-level data

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  • Dany Brouillette
  • Olena Kostyshyna
  • Natalia Kyui

Abstract

We assess the importance of downward nominal wage rigidity (DNWR) in Canada using employer-level administrative data from the major wage settlements (MWS) and household-based survey data from the Survey of Labour Income Dynamics (SLID). MWS data cover large unionized firms in Canada, while SLID is a rich rotating panel representative of the employed population in Canada. Combining both sources of information allows for an extensive analysis of DNWR in the Canadian labour market. We find large shares of wage freezes and smaller shares of wage cuts in both MWS and SLID. Shares of freezes are higher at lower CPI inflation rates, based on provincial data. These observations are consistent with the presence of DNWR. DNWR in Canada appears to be larger than in other countries such as the United States, the United Kingdom and European countries. The incidence of DNWR is heterogeneous across firms and workers characteristics. Wages report less DNWR over longer horizons.

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  • Dany Brouillette & Olena Kostyshyna & Natalia Kyui, 2018. "Downward nominal wage rigidity in Canada: Evidence from micro-level data," Canadian Journal of Economics, Canadian Economics Association, vol. 51(3), pages 968-1002, August.
  • Handle: RePEc:cje:issued:v:51:y:2018:i:3:p:968-1002
    DOI: 10.1111/caje.12347
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    Cited by:

    1. Amjad Naveed & Nisar Ahmad & Rayhaneh Esmaeilzadeh & Amber Naz, 2019. "Self-Employment Dynamics of Immigrants and Natives: Individual-level Analysis for the Canadian Labour Market," Sustainability, MDPI, vol. 11(23), pages 1-22, November.
    2. Dany Brouillette & Natalia Kyui, 2017. "Downward Nominal Wage Rigidity, Inflation and Unemployment: New Evidence Using Micro-Level Data," Staff Analytical Notes 17-6, Bank of Canada.
    3. Dany Brouillette & James Ketcheson & Olena Kostyshyna & Jonathan Lachaine, 2017. "Wage Growth in Canada and the United States: Factors Behind Recent Weakness," Staff Analytical Notes 17-8, Bank of Canada.
    4. Joel Wagner, 2018. "Downward nominal wage rigidity in Canada: Evidence against a “greasing effect”," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 51(3), pages 1003-1028, August.
    5. Joel Wagner, 2018. "Downward nominal wage rigidity in Canada: Evidence against a greasing effect," Canadian Journal of Economics, Canadian Economics Association, vol. 51(3), pages 1003-1028, August.

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