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The margins of labour cost adjustment: survey evidence from european firms

Author

Listed:
  • Jan Babecký

    (Czech National Bank)

  • Philip Du Caju

    (National Bank of Belgium)

  • Theodora Kosma

    (Bank of Greece)

  • Martina Lawless

    (Central Bank and Financial Services Authority of Ireland)

  • Julián Messina

    (World Bank and University of Girona)

  • Tairi Rõõm

    (Bank of Estonia)

Abstract

Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. We broaden the analysis beyond downward rigidity in base wages by investigating the use of other margins of labour cost adjustment at the firm level. Using data from a unique survey, we find that firms make frequent use of other, more flexible, components of compensation to adjust the cost of labour. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. We also show how the margins of adjustment chosen are affected by firm and worker characteristics.

Suggested Citation

  • Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2009. "The margins of labour cost adjustment: survey evidence from european firms," Working Papers 108, Bank of Greece.
    • Handle: RePEc:bog:wpaper:108
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    References listed on IDEAS

    as
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    3. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 884-910, December.
    4. Holden Steinar & Wulfsberg Fredrik, 2008. "Downward Nominal Wage Rigidity in the OECD," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-50, April.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    labour costs; wage rigidity; firm survey; European Union;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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