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Price, wage and employment response to shocks: evidence from the WDN survey

  • Bertola, Giuseppe
  • Dabusinskas, Aurelijus
  • Hoeberichts, Marco
  • Izquierdo, Mario
  • Kwapil, Claudia
  • Montornès, Jeremi
  • Radowski, Daniel

We analyse the relative intensity and character of price vs. cost and wage vs. employment firm-level adjustment to cost-push shocks in the European System of Central Banks Wage Dynamics Network (WDN) survey data set. The results document several statistically significant and theoretically sensible relationships: price increases are less likely when product market competition is more intense, and more likely when collective wage agreements or employment protection legislation constrain firm-level reactions. We discuss how changes of such structural and institutional features of firms and of their environment may underlie the evolution of macroeconomic adjustment mechanisms in Europe.

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Article provided by Elsevier in its journal Labour Economics.

Volume (Year): 19 (2012)
Issue (Month): 5 ()
Pages: 783-791

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Handle: RePEc:eee:labeco:v:19:y:2012:i:5:p:783-791
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