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Non-base Wage Components as a Source of Wage Adaptability to Shocks: Evidence from European Firms, 2010-2013

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  • Jan Babecky
  • Clemence Berson
  • Ludmila Fadejeva
  • Ana Lamo
  • Petra Marotzke
  • Fernando Martins
  • Pawel Strzelecki

Abstract

This paper provides evidence on the role of non-base wage components as a channel for firms to adjust labour costs in the event of adverse shocks. It uses data from a firm-level survey for 25 European countries that covers the period 2010-2013. We find that firms subject to nominal wage rigidities, which prevent them from adjusting base wages, are more likely to cut non-base wage components in order to adjust labour costs when needed. Firms thus use non-base wage components as a buffer to overcome base wage rigidity. We further show that while non-base wage components exhibit some degree of downward rigidity, they do so to a lesser extent than base wages.

Suggested Citation

  • Jan Babecky & Clemence Berson & Ludmila Fadejeva & Ana Lamo & Petra Marotzke & Fernando Martins & Pawel Strzelecki, 2018. "Non-base Wage Components as a Source of Wage Adaptability to Shocks: Evidence from European Firms, 2010-2013," Working Papers 2018/1, Czech National Bank.
  • Handle: RePEc:cnb:wpaper:2018/1
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    Cited by:

    1. Marotzke Petra & Anderton Robert & Bairrao Ana & Berson Clémence & Tóth Peter, 2020. "Asymmetric wage adjustment and employment in European firms," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-25, June.
    2. Effrosyni Adamopoulou & Ernesto Villanueva, 2020. "Wage determination and the bite of collective contracts in Italy and Spain: evidence from the metal working industry," Working Papers 2036, Banco de España.
    3. Caloia, Francesco G. & Parlevliet, Jante & Mastrogiacomo, Mauro, 2023. "Staggered wages, unanticipated shocks and firms’ adjustments," Journal of Macroeconomics, Elsevier, vol. 76(C).
    4. Francesco Caloia & Jante Parlevliet & Mauro Mastrogiacomo, 2021. "Staggered wages, unanticipated shocks and firms’ adjustments," Working Papers 711, DNB.
    5. Adamopoulou, Effrosyni & Villanueva, Ernesto, 2022. "Wage determination and the bite of collective contracts in Italy and Spain," Labour Economics, Elsevier, vol. 76(C).
    6. repec:cnb:ocpubv:as17 is not listed on IDEAS
    7. Jan Babecky & Kamil Galuscak & Diana Zigraiova, 2017. "Wage Dynamics and Financial Performance: Evidence from Czech Firms," Working Papers 2017/14, Czech National Bank.
    8. Jakub Grossmann, 2021. "The Effects of Minimum Wage Increases in the Czech Republic," Working Papers 2021/2, Czech National Bank.

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    More about this item

    Keywords

    Bonuses; downward nominal wage rigidity; European Union; firm survey;
    All these keywords.

    JEL classification:

    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J32 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Nonwage Labor Costs and Benefits; Retirement Plans; Private Pensions
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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