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On Sand and the Role of Grease in Labor Markets; How Does Germany Compare?

  • Jörg Decressin
  • Anja Decressin
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    This paper investigates wage setting in (west) Germany using the German Socioeconomic Panel dataset on individuals and compares the findings with those available for the United Kingdom and the United States. The fraction of job stayers in (west) Germany who suffer unchanged wages or wage cuts compares with that in similar data for the Anglo-American countries, even after various adjustments for potential reporting errors. While nominal wages of job stayers are rigid downward, real wages are not. Nevertheless, the macroeconomic effects of the nominal rigidity are limited and cannot be weakened substantially by raising inflation.

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    Paper provided by International Monetary Fund in its series IMF Working Papers with number 02/164.

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    Length: 37
    Date of creation: 01 Sep 2002
    Handle: RePEc:imf:imfwpa:02/164
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    1. Eswar S. Prasad, 2004. "The Unbearable Stability of the German Wage Structure: Evidence and Interpretation," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 354-385.
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    8. 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.
    9. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1), pages 1-76.
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    16. Paul J. Devereux & Joseph G. Altonji, 2000. "The extent and consequences of downward nominal wage rigidity," Open Access publications 10197/311, School of Economics, University College Dublin.
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