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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
    Date of revision:
    Handle: RePEc:imf:imfwpa:02/164
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    1. David Card & Dean Hyslop, 1995. "Does Inflation 'Grease the Wheels of the Labor Market'?," Working Papers 735, Princeton University, Department of Economics, Industrial Relations Section..
    2. Azariadis, Costas, 1975. "Implicit Contracts and Underemployment Equilibria," Journal of Political Economy, University of Chicago Press, vol. 83(6), pages 1183-1202, December.
    3. Mankiw, N Gregory, 1985. "Small Menu Costs and Large Business Cycles: A Macroeconomic Model," The Quarterly Journal of Economics, MIT Press, vol. 100(2), pages 529-38, May.
    4. Grund, Christian, 1999. "Stigma effects of layoffs?: Evidence from German micro-data," Economics Letters, Elsevier, vol. 64(2), pages 241-247, August.
    5. 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.
    6. Stephen Nickell & Glenda Quintini, 2001. "Nominal wage rigidity and the rate of inflation," LSE Research Online Documents on Economics 20131, London School of Economics and Political Science, LSE Library.
    7. David E. Lebow & David J. Stockton & William L. Wascher, 1995. "Inflation, nominal wage rigidity, and the efficiency of labor markets," Finance and Economics Discussion Series 95-45, Board of Governors of the Federal Reserve System (U.S.).
    8. Erica L. Groshen & Mark E. Schweitzer, 1999. "Firms' wage adjustments: a break from the past?," Working Paper 9908, Federal Reserve Bank of Cleveland.
    9. Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages C176-95, March.
    10. Burda, Michael C. & Mertens, Antje, 2001. "Estimating wage losses of displaced workers in Germany," Labour Economics, Elsevier, vol. 8(1), pages 15-41, January.
    11. Eswar Prasad, 2000. "The Unbearable Stability of the German Wage Structure; Evidence and Interpretation," IMF Working Papers 00/22, International Monetary Fund.
    12. Michael C. Burda & Jennifer Hunt, 2001. "From Reunification to Economic Integration: Productivity and the Labor Market in Eastern Germany," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 32(2), pages 1-92.
    13. John Bound & Alan B. Krueger, 1989. "The Extent of Measurement Error In Longitudinal Earnings Data: Do Two Wrongs Make A Right?," NBER Working Papers 2885, National Bureau of Economic Research, Inc.
    14. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
    15. Joseph G. Altonji & Paul J. Devereux, 1999. "The Extent and Consequences of Downward Nominal Wage Rigidity," NBER Working Papers 7236, National Bureau of Economic Research, Inc.
    16. Jerry Hausman, 2001. "Mismeasured Variables in Econometric Analysis: Problems from the Right and Problems from the Left," Journal of Economic Perspectives, American Economic Association, vol. 15(4), pages 57-67, Fall.
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