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Downward Nominal Wage Rigidity: Unions’ Merit Or Firms’ Foresight?

Listed author(s):
  • Alexander V. Larin

    ()

    (National Research University Higher School of Economics)

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    This paper investigates the sources of the downward nominal wage rigidity in Russia. The empirical analysis is based on the RLMS-HSE household survey from 2004 to 2013. We show that, in spite of weak labor unions in Russia, the extent of downward nominal wage rigidity is high. Moreover, the probability of a wage freeze is decreasing in firm size and is lower for industries with industry-level tarif agreements. Our ndings present empirical evidence that the main source of the downward nominal wage rigidity is not the labor unions, but firms' voluntary decision to prevent wage cuts, which may cause quits of valuable employees and/or a decrease in their efforts

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    Paper provided by National Research University Higher School of Economics in its series HSE Working papers with number WP BRP 86/EC/2014.

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    Length: 17 pages
    Date of creation: 2014
    Publication status: Published in WP BRP Series: Economics / EC, December 2014, pages 1-17
    Handle: RePEc:hig:wpaper:86/ec/2014
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    1. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 884-910, December.
    2. Holden Steinar & Wulfsberg Fredrik, 2008. "Downward Nominal Wage Rigidity in the OECD," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-50, April.
    3. N. Vishnevskaya & O. Kulikov., 2009. "Wage-setting in Russia: The Role of Industry-level Tariff Agreements," VOPROSY ECONOMIKI, N.P. Redaktsiya zhurnala "Voprosy Economiki", vol. 4.
    4. Lorenz Goette & Uwe Sunde & Thomas Bauer, 2007. "Wage Rigidity: Measurement, Causes and Consequences," Economic Journal, Royal Economic Society, vol. 117(524), pages 499-507, November.
    5. Jonas Agell & Per Lundborg, "undated". "Survey evidence on wage rigidity and unemployment: Sweden in the 1990s," EPRU Working Paper Series 99-15, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics.
    6. Dickens, William T. & Götte, Lorenz & Groshen, Erica L. & Holden, Steinar & Messina, Julián & Schweitzer, Mark E. & Turunen, Jarkko & Ward-Warmedinger, Melanie, 2006. "How wages change: micro evidence from the International Wage Flexibility Project," Working Paper Series 0697, European Central Bank.
    7. Klein, R.W. & Spady, R.H., 1991. "An Efficient Semiparametric Estimator for Binary Response Models," Papers 70, Bell Communications - Economic Research Group.
    8. Michael W. L. Elsby, 2005. "Evaluating the economic significance of downward nominal wage rigidity," LSE Research Online Documents on Economics 19882, London School of Economics and Political Science, LSE Library.
    9. Daniel Dias & Carlos Robalo Marques & Fernando Martins, 2013. "The determinants of downward wage rigidity: Some methodological considerations and new empirical evidence," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
    10. P. Du Caju & C. Fuss & L. Wintr, 2012. "Sectoral differences in downward real wage rigidity: workforce composition, institutions, technology and competition," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 45(1), pages 7-22, March.
    11. Solow, Robert M., 1979. "Another possible source of wage stickiness," Journal of Macroeconomics, Elsevier, vol. 1(1), pages 79-82.
    12. Philip Du Caju & Catherine Fuss & Ladislav Wintr, 2009. "Understanding sectoral differences in downward real wage rigidity : workforce composition, institutions, technology and competition," Working Paper Research 156, National Bank of Belgium.
    13. Muravyev, Alexander & Oshchepkov, Aleksey, 2013. "Minimum Wages, Unemployment and Informality: Evidence from Panel Data on Russian Regions," IZA Discussion Papers 7878, Institute for the Study of Labor (IZA).
    14. Daiji Kawaguchi & Fumio Ohtake, 2004. "Testing the Morale Theory of Nominal Wage Rigidity," ISER Discussion Paper 0602, Institute of Social and Economic Research, Osaka University.
    15. Philip Du Caju & Theodora Kosma & Martina Lawless & Tairi Rõõm, 2013. "Why firms avoid cutting wages: survey evidence from European firms," Bank of Estonia Working Papers wp2013-2, Bank of Estonia, revised 24 May 2013.
    16. George A. Akerlof, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, Oxford University Press, vol. 97(4), pages 543-569.
    17. Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages 176-195, March.
    18. Smith, Jennifer C., 2002. "Pay Cuts And Morale : A Test Of Downward Nominal Rigidity," The Warwick Economics Research Paper Series (TWERPS) 649, University of Warwick, Department of Economics.
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