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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. repec:oup:qjecon:v:109:y:1994:i:1:p:1-25 is not listed on IDEAS
  2. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2007. "How Wages Change: Micro Evidence from the International Wage Flexibility Project," Journal of Economic Perspectives, American Economic Association, vol. 21(2), pages 195-214, Spring.
  3. Paul J. Devereux, 2001. "The cyclicality of real wages within employer-employee matches," Open Access publications 10197/312, School of Economics, University College Dublin.
  4. Donggyun Shin & Gary Solon, 2006. "New Evidence on Real Wage Cyclicality within Employer-Employee Matches," NBER Working Papers 12262, National Bureau of Economic Research, Inc.
  5. Steinar Holden & Fredrik Wulfsberg, 2007. "Downward Nominal Wage Rigidity in the OECD," CESifo Working Paper Series 2009, CESifo Group Munich.
  6. Paul J. Devereux & Robert A. Hart, 2006. "Real wage cyclicality of job stayers, within-company job movers, and between-company job movers," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 60(1), pages 105-119, October.
  7. Wolfgang Franz & Friedhelm Pfeiffer, 2006. "Reasons for Wage Rigidity in Germany," LABOUR, CEIS, vol. 20(2), pages 255-284, 06.
  8. Wolfgang Ochel, 2003. "Decentralising Wage Bargaining in Germany – A Way to Increase Employment?," CESifo Working Paper Series 1069, CESifo Group Munich.
  9. Steinar Holden & Fredrik Wulfsberg, 2004. "Downward Nominal Wage Rigidity in Europe," Working Paper 2004/5, Norges Bank.
  10. Laurence Ball & David Romer, 1987. "Sticky Prices as Coordination Failure," NBER Working Papers 2327, National Bureau of Economic Research, Inc.
  11. Peng, Fei & Siebert, W. Stanley, 2006. "Real Wage Cyclicality in Italy," IZA Discussion Papers 2465, Institute for the Study of Labor (IZA).
  12. 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.
  13. 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).
  14. Shin, Donggyun, 1994. "Cyclicality of real wages among young men," Economics Letters, Elsevier, vol. 46(2), pages 137-142, October.
  15. 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.
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