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Wage Dynamics and Financial Performance: Evidence from Czech Firms

Author

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  • Jan Babecky
  • Kamil Galuscak
  • Diana Zigraiova

Abstract

This paper examines how the financial performance of a firm affects its wage policy. For this purpose, we match data on Czech firms from the Wage Dynamics Network survey covering the period 2010-2013 with balance sheet data. Controlling for a number of firm-specific characteristics and the environment in which firms operate, we find that financial performance matters for wage setting: contractual wages are more likely to grow in firms with a higher ratio of cash flow to total assets and in firms that invest more. Conversely, firms that froze or cut contractual wages during the survey period had lower cash flow over total assets, but not necessarily a lower investment ratio. The flexible wage component exhibits a similar pattern, but is more sensitive to demand shocks and firms' financial conditions.

Suggested Citation

  • Jan Babecky & Kamil Galuscak & Diana Zigraiova, 2017. "Wage Dynamics and Financial Performance: Evidence from Czech Firms," Working Papers 2017/14, Czech National Bank.
    • Handle: RePEc:cnb:wpaper:2017/14
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Base wages; financial performance; flexible wage component; survey data; wage setting;
    All these keywords.

    JEL classification:

    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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