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Price, Wage and Employment Response to Shocks: Evidence from the WDN Survey

  • Bertola, Giuseppe
  • Dabusinskas, Aurelijus
  • Hoeberichts, Marco
  • Izquierdo, Mario
  • Kwapil, Claudia
  • Montornes, Jérémi
  • Radowski, Daniel

This paper analyses information from survey data collected in the framework of the Eurosystem’s Wage Dynamics Network (WDN) on patterns of firm-level adjustment to shocks. We document that the relative intensity and the character of price vs. cost and wage vs. employment adjustments in response to cost-push shocks depend - in theoretically sensible ways - on the intensity of competition in firms’ product markets, on the importance of collective wage bargaining and on other structural and institutional features of firms and of their environment. Focusing on the pass-through of cost shocks to prices, our results suggest that the pass-through is lower in highly competitive firms. Furthermore, a high degree of employment protection and collective wage agreements tend to make this pass-through stronger.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7706.

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Date of creation: Feb 2010
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Handle: RePEc:cpr:ceprdp:7706
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  1. Jan Babecky & Philip Du Caju & Theodora Kosma & Martina Lawless & Julian Messina & Tairi Room, 2009. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Working Papers 2009/4, Czech National Bank, Research Department.
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  19. Ai, Chunrong & Norton, Edward C., 2003. "Interaction terms in logit and probit models," Economics Letters, Elsevier, vol. 80(1), pages 123-129, July.
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