Wage flexibility in Britain: some micro and macro evidence
This paper uses the British New Earnings Survey (NES) to derive both macro and micro measures of wage rigidities. The data set spans the 1975-2000 period, with wage observations covering approximately 1% of the British workforce. Using this data set, we consider whether wages have become more flexible in recent years. Evidence drawn from macroeconomic wage equation estimates suggests that, while the relationship between wages and unemployment seems to have changed, the responsiveness of wages to unemployment rates has declined in the 1990s. In contrast to previous findings, these results suggest that wages have become less flexible. Micro tests mainly reveal that the prevalence of nominal rigidities has not declined, although there is weak evidence for a decline in the most recent years. Micro tests of wage rigidities also include an analysis of real wage rigidities. There is evidence in the NES of spikes in the wage-change distribution at the rate of inflation, beyond what would be anticipated from the rest of the distribution, suggesting the presence of real wage rigidities. This evidence is shown to be statistically significant, and points to an increase in real rigidities over the period of study.
|Date of creation:||Jul 2007|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/Email:
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ernst Fehr & Lorenz Goette, 2007.
"The Robustness and Real Consequences of Nominal Wage Rigidity,"
Kiel Working Papers
1343, Kiel Institute for the World Economy.
- Fehr, Ernst, 2000. "The Robustness and Real Consequences of Nominal Wage Rigidity," CEPR Discussion Papers 2516, C.E.P.R. Discussion Papers.
- Erica L. Groshen & Mark E. Schweitzer, 1997.
"Identifying inflations grease and sand effects in the labor market,"
9705, Federal Reserve Bank of Cleveland.
- Erica Groshen & Mark Schweitzer, 1999. "Identifying Inflation's Grease and Sand Effects in the Labor Market," NBER Chapters, in: The Costs and Benefits of Price Stability, pages 273-314 National Bureau of Economic Research, Inc.
- Erica L. Groshen & Mark E. Schweitzer, 1997. "Identifying Inflation's Grease and Sand Effects in the Labor Market," NBER Working Papers 6061, National Bureau of Economic Research, Inc.
- Erica L. Groshen & Mark E. Schweitzer, 1997. "Identifying inflation's grease and sand effects in the labor market," Staff Reports 31, Federal Reserve Bank of New York.
- Jennifer V Greenslade & Richard G Pierse & Jumana Saleheen, 2003. "A Kalman filter approach to estimating the UK NAIRU," Bank of England working papers 179, Bank of England.
- Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
- Ernst Fehr & Lorenz Götte, 2000.
"Robustness and Real Consequences of Nominal Wage Rigidity,"
CESifo Working Paper Series
335, CESifo Group Munich.
- Fehr, Ernst & Goette, Lorenz, 2005. "Robustness and real consequences of nominal wage rigidity," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 779-804, May.
- Ernst Fehr & Lorenz Goette, . "Robustness and Real Consequences of Nominal Wage Rigidity," IEW - Working Papers 044, Institute for Empirical Research in Economics - University of Zurich.
- Ernst Fehr & Lorenz Goette, 2004. "Robustness And Real Consequences Of Nominal Wage Rigidity," Macroeconomics 0409025, EconWPA.
- Bell, Brian & Nickell, Stephen & Quintini, Glenda, 2002.
"Wage equations, wage curves and all that,"
Elsevier, vol. 9(3), pages 341-360, July.
- B Bell & Stephen Nickell & Glenda Quintini, 2000. "Wage Equations, Wage Curves and All That," CEP Discussion Papers dp0472, Centre for Economic Performance, LSE.
- Brian Bell & Stephen Nickell & Glenda Quintini, 2000. "Wage equations, wage curves and all that," LSE Research Online Documents on Economics 20165, London School of Economics and Political Science, LSE Library.
- MacLeod, W Bentley & Malcomson, James M, 1993. "Investments, Holdup, and the Form of Market Contracts," American Economic Review, American Economic Association, vol. 83(4), pages 811-37, September.
- Kenneth J. McLaughlin, 1999. "Are nominal wage changes skewed away from wage cuts?," Review, Federal Reserve Bank of St. Louis, issue May, pages 117-132.
- Stephen Nickell & Glenda Quintini, 2001.
"Nominal wage rigidity and the rate of inflation,"
LSE Research Online Documents on Economics
20131, London School of Economics and Political Science, LSE Library.
- McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
- David E. Lebow & David J. Stockton & William L. Wascher, 1995. "Inflation, nominal wage rigidity, and the efficiency of labor markets," Finance and Economics Discussion Series 95-45, Board of Governors of the Federal Reserve System (U.S.).
- Joseph G. Altonji & Paul J. Devereux, 1999. "The Extent and Consequences of Downward Nominal Wage Rigidity," NBER Working Papers 7236, National Bureau of Economic Research, Inc.
- Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages C176-95, March.
When requesting a correction, please mention this item's handle: RePEc:boe:boeewp:331. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.