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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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File URL: http://www.cnb.cz/en/research/research_publications/cnb_wp/download/cnbwp_2008_12.pdf
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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
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Handle: RePEc:cnb:wpaper:2008/12
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  1. Kamil Galuščắk & Mary Keeney & Daphne Nicolitsas & Frank Smets & Pawel Strzelecki & Matija Vodopivec, 2011. "The determination of wages of newly hired employees: survey evidence on internal versus external factors," Working Papers 129, Bank of Greece.
  2. Magdalena M Borys & Roman Horvath, 2008. "The Effects of Monetary Policy in the Czech Republic: An Empirical Study," William Davidson Institute Working Papers Series wp922, William Davidson Institute at the University of Michigan.
  3. Alan S. Blinder & Don H. Choi, 1989. "A Shred of Evidence on Theories of Wage Stickiness," NBER Working Papers 3105, National Bureau of Economic Research, Inc.
  4. Blinder, Alan S, 1991. "Why Are Prices Sticky? Preliminary Results from an Interview Study," American Economic Review, American Economic Association, vol. 81(2), pages 89-96, May.
  5. Philip Ducaju & Erwan Gautier & Daphné Momferatou & Mélanie Ward-Warmedinge, 2008. "Institutional features of wage bargaining in 23 European countries, the US and Japan," Working Paper Research 154, National Bank of Belgium.
  6. Jan Babecký, 2008. "Aggregate Wage Flexibility in New EU Member States," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 2(2), pages 123-145, September.
  7. Emmanuel Dhyne & Luis J. Alvarez & Herve Le Bihan & Giovanni Veronese & Daniel Dias & Johannes Hoffmann & Nicole Jonker & Patrick Lunnemann & Fabio Rumler & Jouko Vilmunen, 2006. "Price Changes in the Euro Area and the United States: Some Facts from Individual Consumer Price Data," Journal of Economic Perspectives, American Economic Association, vol. 20(2), pages 171-192, Spring.
  8. Fabiani, Silvia & Druant, Martine & Hernando, Ignacio & Kwapil, Claudia & Landau, Bettina & Loupias, Claire & Martins, Fernando & Mathä, Thomas Y. & Sabbatini, Roberto & Stahl, Harald & Stokman, Ad C., 2005. "The pricing behaviour of firms in the euro area: new survey evidence," Working Paper Series 0535, European Central Bank.
  9. Bewley, Truman F, 1995. "A Depressed Labor Market as Explained by Participants," American Economic Review, American Economic Association, vol. 85(2), pages 250-54, May.
  10. Wolfgang Franz & Friedhelm Pfeiffer, 2006. "Reasons for Wage Rigidity in Germany," LABOUR, CEIS, vol. 20(2), pages 255-284, 06.
  11. Giovanni Olivei & Silvana Tenreyro, 2006. "The Timing of Monetary Policy Shocks," CEP Discussion Papers dp0725, Centre for Economic Performance, LSE.
  12. Shapiro, Carl & Stiglitz, Joseph E, 1984. "Equilibrium Unemployment as a Worker Discipline Device," American Economic Review, American Economic Association, vol. 74(3), pages 433-44, June.
  13. Hall, Simon & Walsh, Mark & Yates, Anthony, 2000. "Are UK Companies' Prices Sticky?," Oxford Economic Papers, Oxford University Press, vol. 52(3), pages 425-46, July.
  14. David Amirault & Carolyn Kwan & Gordon Wilkinson, 2006. "Survey of Price-Setting Behaviour of Canadian Companies," Working Papers 06-35, Bank of Canada.
  15. Campbell, Carl M, III & Kamlani, Kunal S, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, MIT Press, vol. 112(3), pages 759-89, August.
  16. Jan Babecký & Kamil Dybczak, 2008. "Real Wage Flexibility in the Enlarged Eu: Evidence From a Structural Var," National Institute Economic Review, National Institute of Economic and Social Research, vol. 204(1), pages 126-138, April.
  17. Kamil Galušèák & Daniel Münich, 2005. "Regional Wage Adjustments and Unemployment: Estimating the Time-Varying Wage Curve (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 55(1-2), pages 68-82, January.
  18. Agell, Jonas & Lundborg, Per, 1995. " Theories of Pay and Unemployment: Survey Evidence from Swedish Manufacturing Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 97(2), pages 295-307, June.
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