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Do sticky wages matter? New evidence from matched firm-survey and register data

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  • Anne Kathrin Funk
  • Daniel Kaufmann

Abstract

This paper provides novel evidence on downward nominal wage rigidities and their allocative effects in Switzerland. We match individual wages from a bi-annual firm survey with information on annual income and employment from social security register data. We relevant downward nominal wage rigidities in the base wage, which accounts for more than 90% of employment income. We then identify the allocative effects of downward nominal wage rigidities on income and employment after an unexpected 1% decline of the consumer price level. Base wage rigidities cause a decline of aggregate income (-0.39%) and employment income (-0.97%), as well as an increase of unemployment (2.11%).

Suggested Citation

  • Anne Kathrin Funk & Daniel Kaufmann, 2020. "Do sticky wages matter? New evidence from matched firm-survey and register data," IRENE Working Papers 20-06, IRENE Institute of Economic Research.
    • Handle: RePEc:irn:wpaper:20-06
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    Cited by:

    1. Patrick Arni & Pether H. Egger & Katharina Erhardt & Matthias Gubler & Philip Sauré, 2024. "Heterogeneous Impacts of Trade Shocks on Workers," Working Papers 2409, Gutenberg School of Management and Economics, Johannes Gutenberg-Universität Mainz.
    2. Anne Kathrin Funk & Daniel Kaufmann, 2022. "Do Bonuses Offset the Allocative Effects of Downward Rigid Base Wages?," AEA Papers and Proceedings, American Economic Association, vol. 112, pages 486-490, May.
    3. Bertheau, Antoine & Kudlyak, Marianna & Larsen, Birthe & Bennedsen, Morten, 2025. "Why Firms Lay Off Workers Instead of Cutting Wages: Evidence From Linked Survey-Administrative Data," Discussion Paper Series in Economics 4/2025, Norwegian School of Economics, Department of Economics.
    4. Alex Oktay, 2022. "Heterogeneity in the exchange rate pass-through to consumer prices: the Swiss franc appreciation of 2015," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 158(1), pages 1-20, December.
    5. Raphael Auer & Ariel Burstein & Katharina Erhardt & Sarah M. Lein, 2019. "Exports and Invoicing: Evidence from the 2015 Swiss Franc Appreciation," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 533-538, May.
    6. Freitag, Andreas & Lein, Sarah M., 2023. "Endogenous product adjustment and exchange rate pass-through," Journal of International Economics, Elsevier, vol. 140(C).
    7. Bäurle, Gregor & Lein, Sarah M. & Steiner, Elizabeth, 2021. "Employment adjustment and financial tightness – Evidence from firm-level data," Journal of International Money and Finance, Elsevier, vol. 115(C).

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    More about this item

    Keywords

    Downward nominal wage rigidity; income; unemployment; deflation.;
    All these keywords.

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General

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