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Are wages rigid in Colombia?: Empirical evidence based on a sample of wages at the firm level

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Listed:
  • Ana María Iregui B.
  • Ligia Alba Melo B.
  • María Teresa Ramírez G.

Abstract

This paper uses Colombian data at the firm level for the period 1999 to 2006 to provide microeconomic evidence on the existence and extent of downward nominal wage rigidity. To conduct the analysis, we use a rich panel of firms for white and blue collar workers, consisting of 1517 firms for the former and 781 firms for the latter. The presence of wage rigidity is determined by means of three statistic techniques used in recent literature, such as the analysis of the histograms of the distribution of wage changes, the LSW statistic and the Kahn test. The results suggest the existence of downward nominal wage rigidities; it is worth mentioning that rigidity is higher for blue collar workers than white collar workers, since the increase in the wages of the blue workers is generally done by taking into account the change in the minimum wage, which is why a higher rigidity would be expected.

Suggested Citation

  • Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ramírez G., 2009. "Are wages rigid in Colombia?: Empirical evidence based on a sample of wages at the firm level," Borradores de Economia 571i, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:571i
    DOI: 10.32468/be.571I.pdf?sequence=71&isAllowed=y
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    Cited by:

    1. Ana Iregui & Ligia Melo & María Ramírez, 2012. "Wage Adjustment Practices and the Link between Price and Wages: Survey Evidence from Colombian Firms," Lecturas de Economía, Universidad de Antioquia, Departamento de Economía, issue 76, pages 17-53.
    2. Gomez Ospina, Monica A., 2023. "Optimal monetary policy in developing countries: The role of informality," Journal of Economic Dynamics and Control, Elsevier, vol. 155(C).
    3. Ahrens, Steffen & Pirschel, Inske & Snower, Dennis J., 2014. "A theory of wage adjustment under loss aversion," Kiel Working Papers 1977, Kiel Institute for the World Economy (IfW Kiel).
    4. Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ramírez G., 2010. "Downward Wage Rigidities and Other Firms’ Responses to an Economic Slowdown: Evidence from a Survey of Colombian Firms," Borradores de Economia 612, Banco de la Republica de Colombia.
    5. Andrés González & Lavan Mahadeva & Juan D. Prada & Diego Rodríguez, 2011. "Policy Analysis Tool Applied to Colombian Needs: Patacon Model Description," Revista ESPE - Ensayos sobre Política Económica, Banco de la Republica de Colombia, vol. 29(66), pages 222-245, December.
    6. Laura Inés D'Amato & Enrique López Enciso & María Teresa Ramírez Giraldo (ed.), 2013. "Dinámica inflacionaria, persistencia y formación de precios y salarios," Investigación Conjunta-Joint Research, Centro de Estudios Monetarios Latinoamericanos, CEMLA, edition 1, volume 1, number 2, December.

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    More about this item

    Keywords

    Wage rigidity; Kahn test; LSW Statistic; Colombia.;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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