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Downward Nominal Wage Rigidity in Italy: Evidence and Consequences

  • Francesco Devicienti

This paper uses administrative longitudinal micro-data from the Italian Social Security Institute (INPS) to estimate the extent of downward nominal wage rigidity. The determinants of wage changes are explicitly modelled, as is the measurement error deriving from the fact that earnings inclusive of benefits, not hourly wages, are available in the data. Estimates show that the degree of downward nominal wage rigidity is medium/high – between 51% and 68% of all notional wage cuts being prevented by the existence of proportional rigidity. The implications of the estimated nominal wage rigidity for the real side of the economy are also explored.

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Paper provided by LABORatorio R. Revelli, Centre for Employment Studies in its series LABORatorio R. Revelli Working Papers Series with number 20.

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Length: 58 pages
Date of creation: 2002
Date of revision:
Handle: RePEc:cca:wplabo:20
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