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Downward Nominal Rigidity in US Wage Data from the PSID - An Application of the Kernel-Location Approach

Listed author(s):
  • Knoppik, Christoph

Earlier studies of US wage data from the PSID with a variety of methods have led to mixed results with respect to the existence and extent of downward nominal wage rigidity. Here the kernellocation approach to the analysis of downward nominal wage rigidity in micro data is applied to that data for the first time, in order to non-parametrically estimate counterfactual and factual distributions of annual nominal wage changes, the rigidity function and the average degree of downward nominal wage rigidity. Avoiding several problems of earlier studies by the use of the kernellocation approach, a substantial degree of downward nominal wage rigidity is found, and earlier evidence in favor of the hypothesis of downwardly rigid nominal wages is corroborated, weakening the institutionalist view of downward nominal wage rigidity. Frühere Untersuchungen zu US-amerikanischen Lohndaten der PSID unter Verwendung unterschiedlicher Methoden haben recht verschiedene Ergebnisse bzgl. der Existenz und des Ausmaßes von Abwärtsnominallohnstarrheit gezeitigt. In diesem Beitrag wird zum ersten Mal der Kernel-Location-Approach zur Analyse der Abwärtsnominallohnstarrheit in Mikrodaten verwandt. Mit ihm wird eine nicht-parametrische Schätzung der kontrafaktischen und der faktischen Verteilungen, der Starrheitsfunktion und des durchschnittlichen Grades der Abwärtsnominallohnstarrheit durchgeführt. Die Vermeidung vieler Probleme früherer Studien durch die Anwendung des Kernel-Location-Approach ermöglicht den Nachweis eines erheblichen Grades an Abwärtsnominallohnstarrheit. Dadurch können frühere, die Hypothese abwärtsstarrer Nominallöhne stützende, Ergebnisse untermauert werden, wobei gleichzeitig die institutionalistische Position zur Abwärtsnominallohnstarrheit geschwächt wird.

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Paper provided by University of Regensburg, Department of Economics in its series University of Regensburg Working Papers in Business, Economics and Management Information Systems with number 393.

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Date of creation: 2004
Handle: RePEc:bay:rdwiwi:663
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  1. David Card & Dean Hyslop, 1997. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Chapters,in: Reducing Inflation: Motivation and Strategy, pages 71-122 National Bureau of Economic Research, Inc.
  2. Hardle, Wolfgang & Linton, Oliver, 1986. "Applied nonparametric methods," Handbook of Econometrics,in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 38, pages 2295-2339 Elsevier.
  3. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
  4. Christofides, Louis N. & Stengos, Thanasis, 2001. "A non-parametric test of the symmetry of PSID wage-change distributions," Economics Letters, Elsevier, vol. 71(3), pages 363-368, June.
  5. Hardle, Wolfgang & Linton, Oliver, 1986. "Applied nonparametric methods," Handbook of Econometrics,in: R. F. Engle & D. McFadden (ed.), Handbook of Econometrics, edition 1, volume 4, chapter 38, pages 2295-2339 Elsevier.
  6. Christina D. Romer & David H. Romer, 1997. "Reducing Inflation: Motivation and Strategy," NBER Books, National Bureau of Economic Research, Inc, number rome97-1, November.
  7. Christoph Knoppik & Thomas Beissinger, 2003. "How Rigid are Nominal Wages? Evidence and Implications for Germany," Scandinavian Journal of Economics, Wiley Blackwell, vol. 105(4), pages 619-641, December.
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