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

  • Giuseppe Bertola

    ()

    (Università Di Torino)

  • Aurelijus Dabusinskas

    ()

    (Eesti Pank)

  • Marco Hoeberichts

    ()

    (De Nederlandsche Bank)

  • Mario Izquierdo

    ()

    (Banco de España)

  • Claudia Kwapil

    ()

    (Oesterreichische Nationalbank)

  • Jeremi Montornès

    ()

    (Banque de France)

  • Daniel Radowski

    ()

    (Deutsche Bundesbank)

This paper analyses information from survey data collected in the framework of the Eurosystem’s Wage Dynamics Network (WDN) on patterns of firm-level adjustment to shocks. We document that the relative intensity and the character of price vs. cost and wage vs. employment adjustments in response to cost-push shocks depend — in theoretically sensible ways — on the intensity of competition in firms’ product markets, on the importance of collective wage bargaining and on other structural and institutional features of firms and of their environment. Focusing on the pass-through of cost shocks to prices, our results suggest that the pass-through is lower in highly competitive firms. Furthermore, a high degree of employment protection and collective wage agreements tend to make this pass through stronger.

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File URL: http://www.bde.es/f/webbde/SES/Secciones/Publicaciones/PublicacionesSeriadas/DocumentosTrabajo/10/Fic/dt1006e.pdf
File Function: First version, April 2010
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Paper provided by Banco de España & Working Papers Homepage in its series Working Papers with number 1006.

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Length: 36 pages
Date of creation: Mar 2010
Date of revision:
Handle: RePEc:bde:wpaper:1006
Contact details of provider: Web page: http://www.bde.es/

Web page: http://www.bde.es/bde/en/secciones/informes/Publicaciones_se/docs/
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  1. Lawless, Martina & Babecký, Jan & Du Caju, Philip & Kosma, Theodora & Messina, Julián & Rõõm, Tairi, 2009. "Downward Nominal and Real Wage Rigidity:Survey Evidence from European Firms," Research Technical Papers 11/RT/09, Central Bank of Ireland.
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  3. Kamil Galuščắk & Mary Keeney & Daphne Nicolitsas & Frank Smets & Pawel Strzelecki & Matija Vodopivec, 2011. "The determination of wages of newly hired employees: survey evidence on internal versus external factors," Working Papers 129, Bank of Greece.
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  6. Gali Jordi, 1994. "Monopolistic Competition, Business Cycles, and the Composition of Aggregate Demand," Journal of Economic Theory, Elsevier, vol. 63(1), pages 73-96, June.
  7. Silvia Fabiani & Martine Druant & Ignacio Hernando & Claudia Kwapil & Bettina Landau & Claire Loupias & Fernando Martins & Thomas Mathä & Roberto Sabbatini & Harald Stahl & Ad Stokman, 2006. "What Firms' Surveys Tell Us about Price-Setting Behavior in the Euro Area," International Journal of Central Banking, International Journal of Central Banking, vol. 2(3), September.
  8. Martine Druant & Silvia Fabiani & Gabor Kezdi & Ana Lamo & Fernando Martins & Roberto Sabbatini, 2009. "How are firms’ wages and prices linked : survey evidence in Europe," Working Paper Research 174, National Bank of Belgium.
  9. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2002. "Insurance within the firm," 10th International Conference on Panel Data, Berlin, July 5-6, 2002 C3-1, International Conferences on Panel Data.
  10. S. Fabiana & M. Druant & I. Hernando & C. Kwapil & B. Landau & C. Loupias & F. Martins & T. Mathä & R. Sabbatini & H. Stahl & A. Stokman, 2005. "The Pricing Behaviour of Firms in the Euro Area New Survey Evidence," DNB Working Papers 058, Netherlands Central Bank, Research Department.
  11. Torben Andersen & Jan Skaksen, 2007. "Labour Demand, Wage Mark-ups and Product Market Integration," Journal of Economics, Springer, vol. 92(2), pages 103-135, October.
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  13. Leonardi, Marco & Pica, Giovanni, 2010. "Who Pays for It? The Heterogeneous Wage Effects of Employment Protection Legislation," IZA Discussion Papers 5335, Institute for the Study of Labor (IZA).
  14. Druant, Martine & Fabiani, Silvia & Kezdi, Gabor & Lamo, Ana & Martins, Fernando & Sabbatini, Roberto, 2012. "Firms' price and wage adjustment in Europe: Survey evidence on nominal stickiness," Labour Economics, Elsevier, vol. 19(5), pages 772-782.
  15. Laurence Ball & David Romer, 1990. "Real Rigidities and the Non-Neutrality of Money," Review of Economic Studies, Oxford University Press, vol. 57(2), pages 183-203.
  16. Gali, Jordi, 1994. "Monopolistic competition, endogenous markups, and growth," European Economic Review, Elsevier, vol. 38(3-4), pages 748-756, April.
  17. Babecký, Jan & Du Caju, Philip & Kosma, Theodora & Lawless, Martina & Messina, Julián & Rõõm, Tairi, 2012. "How do European firms adjust their labour costs when nominal wages are rigid?," Labour Economics, Elsevier, vol. 19(5), pages 792-801.
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  19. Topel, Robert H, 1986. "Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages S111-43, June.
  20. Ana Rute Cardoso & Miguel Portela, 2009. "Micro Foundations for Wage Flexibility: Wage Insurance at the Firm Level," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(1), pages 29-50, 03.
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