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Downward Nominal Wage Rigidity in Europe

  • Holden, Steinar


    (Dept. of Economics, University of Oslo)

  • Wulfsberg, Fredrik


    (Norges Bank)

This paper explores the existence of downward nominal wage rigidity (DNWR) in the industry sectors of 14 European countries, over the period 1973–1999, using a data set of hourly nominal wages at industry level. Based on a novel nonparametric statistical method, which allows for country and year specific variation in both the median and the dispersion of industry wage changes, we reject the hypothesis of no DNWR. The fraction of wage cuts prevented due to DNWR has fallen over time, from 70 percent in the 1970s to 20 percent in the 1990s, but the number of industries aected by DNWR has increased. Wage cuts are less likely in countries and years with high inflation, low unemployment, high union density and strict employment protection legislation.

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Paper provided by Oslo University, Department of Economics in its series Memorandum with number 08/2004.

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Length: 33 pages
Date of creation: 31 Mar 2004
Date of revision:
Publication status: Published in B.E. Journal of Macroeconomics (Advances), 2008.
Handle: RePEc:hhs:osloec:2004_008
Contact details of provider: Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
Phone: 22 85 51 27
Fax: 22 85 50 35
Web page:

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