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Real Wage Cyclicality in Germany and the UK: New Results Using Panel Data

  • Peng, Fei

    ()

    (University of Birmingham)

  • Siebert, W. Stanley

    ()

    (University of Birmingham)

This paper compares the cyclical behaviour of male real wages in Germany and the UK using the German Socio-Economic Panel 1984-2002 and the British Household Panel Survey 1991-2004. We distinguish between job stayers (remaining in the same job), and within- and between-company job movers. Stayers are the large majority in both countries. Using changes in the unemployment rate as the cyclical measure, we find real wages of stayers in the private sector in West Germany – but not East Germany – to be procyclical, and quite sensitive to unemployment, comparable to the US and the UK. We find cyclicality in the public sector in neither country. Thus real wage flexibility is similar in the two countries, apart from East Germany, despite apparent differences in wage-setting institutions.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2688.

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Length: 16 pages
Date of creation: Mar 2007
Date of revision:
Handle: RePEc:iza:izadps:dp2688
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  1. Ebbinghaus, Bernhard & Eichhorst, Werner, 2006. "Employment Regulation and Labor Market Policy in Germany, 1991-2005," IZA Discussion Papers 2505, Institute for the Study of Labor (IZA).
  2. Franz, Wolfgang & Pfeiffer, Friedhelm, 2006. "Reasons for Wage Rigidity in Germany," IZA Discussion Papers 2017, Institute for the Study of Labor (IZA).
  3. Gary Solon & Warren Whatley & Ann Huff Stevens, 1997. "Wage Changes and Intrafirm Job Mobility over the Business Cycle: Two Case Studies," ILR Review, Cornell University, ILR School, vol. 50(3), pages 402-415, April.
  4. Paul J. Devereux & Robert A. Hart, 2005. "Real wage cyclicality of job stayers, within-company job movers, and between-company job movers," Open Access publications 10197/745, School of Economics, University College Dublin.
  5. Holden, Steinar & Wulfsberg, Fredrik, 2007. "Downward nominal wage rigidity in the OECD," Working Paper Series 0777, European Central Bank.
  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. Donggyun Shin & Gary Solon, 2007. "New Evidence On Real Wage Cyclicality Within Employer-Employee Matches," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 648-660, November.
  8. Laurence Ball & David Romer, 1987. "Sticky Prices as Coordination Failure," NBER Working Papers 2327, National Bureau of Economic Research, Inc.
  9. Fei Peng & W. Stanley Siebert, 2008. "Real Wage Cyclicality in Italy," LABOUR, CEIS, vol. 22(4), pages 569-591, December.
  10. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October.
  11. Virginia Doellgast & Ian Greer, 2007. "Vertical Disintegration and the Disorganization of German Industrial Relations-super-1," British Journal of Industrial Relations, London School of Economics, vol. 45(1), pages 55-76, 03.
  12. Wolfgang Ochel, 2005. "Decentralizing Wage Bargaining in Germany - A Way to Increase Employment?," LABOUR, CEIS, vol. 19(1), pages 91-121, 03.
  13. Paul J. Devereux, 2001. "The cyclicality of real wages within employer-employee matches," Open Access publications 10197/312, School of Economics, University College Dublin.
  14. Gary Solon & Robert Barsky & Jonathan A. Parker, 1994. "Measuring the Cyclicality of Real Wages: How Important is Composition Bias?," The Quarterly Journal of Economics, Oxford University Press, vol. 109(1), pages 1-25.
  15. Steinar Holden & Fredrik Wulfsberg, 2004. "Downward Nominal Wage Rigidity in Europe," Working Paper 2004/5, Norges Bank.
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