IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The incidence of nominal and real wage rigidities in Great Britain: 1978–1998

  • Richard D. Barwell
  • Mark E. Schweitzer

This paper analyzes the extent of rigidities in wage setting in Great Britain over the 1980s and 1990s. Our estimation strategy, which generalizes the work of Altonji and Devereux (2000), models the notional wage growth distribution--the distribution of nominal wage growth that would occur in the absence of rigidities in pay--while allowing for the presence of measurement error in the data. The model then allows for the possibility that the nominal wage growth of a fraction of the workforce may be subject to a nominal or real downward rigidity. Our model suggests that real rigidities in wage setting are more prevalent than nominal rigidities, although the incidence of these real wage rigidities has fallen gradually over time. If firms cannot cut real wages in response to negative demand shocks they may resort to laying off workers. Our results support this microfoundation of the wage-unemployment Phillips curve: Workers who are more likely to be protected from wage cuts are also more likely to lose their jobs.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: https://www.clevelandfed.org/~/media/Files/Working%20Papers/wp2005/wp0508-the-incidence-of-nominal-and-real-wage-rigidities-in-great-britain-1978-1998.pdf?la=en
File Function: Full text
Download Restriction: no

Paper provided by Federal Reserve Bank of Cleveland in its series Working Paper with number 0508.

as
in new window

Length:
Date of creation: 2005
Date of revision:
Handle: RePEc:fip:fedcwp:0508
Contact details of provider: Postal: 1455 East 6th St., Cleveland OH 44114
Phone: 216.579.2000
Web page: http://www.clevelandfed.org/

More information through EDIRC

Order Information: Email:


References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Stephen Nickell & Glenda Quintini, 2001. "Nominal wage rigidity and the rate of inflation," LSE Research Online Documents on Economics 20131, London School of Economics and Political Science, LSE Library.
  2. Roger Koenker & Kevin F. Hallock, 2001. "Quantile Regression," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 143-156, Fall.
  3. Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages C176-95, March.
  4. Lawrence J. Christiano & Martin Eichenbaum & Charles Evans, 2001. "Nominal rigidities and the dynamic effects of a shock to monetary policy," Proceedings, Federal Reserve Bank of San Francisco, issue Jun.
  5. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, March.
  6. Simon Burgess & Hélène Turon, 2005. "Unemployment dynamics in Britain," Economic Journal, Royal Economic Society, vol. 115(503), pages 423-448, 04.
  7. John Bound & Charles Brown & Greg J. Duncan & Willard L Rodgers, 1989. "Measurement Error In Cross-Sectional and Longitudinal Labor Market Surveys: Results From Two Validation Studies," NBER Working Papers 2884, National Bureau of Economic Research, Inc.
  8. Ernst Fehr & Lorenz Götte, 2000. "Robustness and Real Consequences of Nominal Wage Rigidity," CESifo Working Paper Series 335, CESifo Group Munich.
  9. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
  10. David Card & Dean Hyslop, 1997. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 71-122 National Bureau of Economic Research, Inc.
  11. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
  12. Peter Howitt, 2002. "Looking Inside the Labor Market: A Review Article," Journal of Economic Literature, American Economic Association, vol. 40(1), pages 125-138, March.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fedcwp:0508. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Lee Faulhaber)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.