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How wages change: micro evidence from the international wage flexibility project

Author

Listed:
  • William T. Dickens
  • Lorenz Goette
  • Erica L. Groshen
  • Steinar Holden
  • Julian Messina
  • Mark E. Schweitzer
  • Jarkko Turunen
  • Melanie Ward

Abstract

How do the complex institutions involved in wage setting affect wage changes? The International Wage Flexibility Project provides new microeconomic evidence on how wages change for continuing workers. We analyze individuals' earnings in thirty-one different data sets from sixteen countries, from which we obtain a total of 360 wage change distributions. We find a remarkable amount of variation in wage changes across workers. Wage changes have a notably non-normal distribution; they are tightly clustered around the median and also have many extreme values. Furthermore, nearly all countries show asymmetry in their wage distributions below the median. Indeed, we find evidence of both downward nominal and real wage rigidities. We also find that the extent of both these rigidities varies substantially across countries. Our results suggest that variations in the extent of union presence in wage bargaining play a role in explaining differing degrees of rigidities among countries.

Suggested Citation

  • William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie Ward, 2007. "How wages change: micro evidence from the international wage flexibility project," Staff Reports 275, Federal Reserve Bank of New York.
  • Handle: RePEc:fip:fednsr:275
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    References listed on IDEAS

    as
    1. Daniele Checchi & Claudio Lucifora, 2002. "Unions and labour market institutions in Europe," Economic Policy, CEPR;CES;MSH, vol. 17(35), pages 361-408, October.
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    Keywords

    Wages ; Income distribution ; Collective bargaining ; Bank competition;

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • J5 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining

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