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Does downward nominal wage rigidity dampen wage increases?

Author

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  • Stüber, Heiko

    (Institute for Employment Research (IAB), Nuremberg, Germany ; Universität Hohenheim)

  • Beissinger, Thomas

Abstract

"Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets." (Author's abstract, IAB-Doku) ((en))

Suggested Citation

  • Stüber, Heiko & Beissinger, Thomas, 2010. "Does downward nominal wage rigidity dampen wage increases?," IAB-Discussion Paper 201016, Institut für Arbeitsmarkt- und Berufsforschung (IAB), Nürnberg [Institute for Employment Research, Nuremberg, Germany].
    • Handle: RePEc:iab:iabdpa:201016
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    More about this item

    Keywords

    Bundesrepublik Deutschland ; Westdeutschland ; Auswirkungen ; Auswirkungen ; erwerbstätige Männer ; IAB-Beschäftigtenhistorik ; Inflation ; Lohnentwicklung ; Lohnerhöhung ; Lohnstarrheit ; Nominallohn ; Reallohn ; 1975-2007;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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