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Survey on Wage and Price Formation of Czech Firms

  • Jan Babecky
  • Kamil Dybczak
  • Kamil Galuscak

Using an ad-hoc survey at the firm level, we investigate the determinants of wage and price-setting practices in Czech firms, the presence and sources of wage rigidity, and reactions of firms to hypothetical shocks. Although the evidence of downward wage rigidity is not widespread, we find particular relevance of efficiency wage models for wage rigidity, while implicit contract theory is relevant in firms employing mainly highskilled labour. The survey further suggests that prices are less rigid than wages, while the link between wage and price changes is weak. As a response to unanticipated shocks such as a demand drop, an increase in the cost of an intermediate input or a wage increase, firms mainly reduce costs by reducing non-labour costs and temporary employment.

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Paper provided by Czech National Bank, Research Department in its series Working Papers with number 2008/12.

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Date of creation: Dec 2008
Date of revision:
Handle: RePEc:cnb:wpaper:2008/12
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  7. Du Caju, Philip & Gautier, Erwan & Momferatou, Daphne & Ward-Warmedinger, Melanie, 2008. "Institutional features of wage bargaining in 23 European countries, the US and Japan," Working Paper Series 0974, European Central Bank.
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  15. Agell, Jonas & Lundborg, Per, 1993. "Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Working Paper Series 380, Research Institute of Industrial Economics.
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