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Downward Nominal Wage Rigidity in Services: Direct Evidence from a Firm Survey

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  • Radowski, Daniel

    (Deutsche Bundesbank)

  • Bonin, Holger

    (IHS - Institute for Advanced Studies, Vienna)

Abstract

The paper uses a new German employer survey on wage setting practices to analyze incidence and sources of nominal wage rigidity in services vs. manufacturing. We observe that wage freezes are significantly more frequent and wage cuts less frequent in services. Reasons preventing wage cuts reported by employers suggest that fear of excess worker turnover could explain this distinct behavior.

Suggested Citation

  • Radowski, Daniel & Bonin, Holger, 2009. "Downward Nominal Wage Rigidity in Services: Direct Evidence from a Firm Survey," IZA Discussion Papers 3923, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3923
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    References listed on IDEAS

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    1. Carl M. Campbell III & Kunal S. Kamlani, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 112(3), pages 759-789.
    2. Wolfgang Franz & Friedhelm Pfeiffer, 2006. "Reasons for Wage Rigidity in Germany," LABOUR, CEIS, vol. 20(2), pages 255-284, June.
    3. Agell, Jonas & Bennmarker, Helge, 2007. "Wage incentives and wage rigidity: A representative view from within," Labour Economics, Elsevier, vol. 14(3), pages 347-369, June.
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    Cited by:

    1. Andres Rodriguez-Clare & Mauricio Ulate & Jose P. Vasquez, 2020. "New-Keynesian Trade: Understanding the Employment and Welfare Effects of Trade Shocks," Working Papers 265, Princeton University, Department of Economics, Center for Economic Policy Studies..
    2. Silvia Fabiani & Ana Lamo & Julián Messina & Tairi Rõõm, 2015. "European firm adjustment during times of economic crisis," IZA Journal of Labor Policy, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-28, December.
    3. Andrés Rodríguez-Clare & Mauricio Ulate & José P. Vásquez, 2020. "Trade with Nominal Rigidities: Understanding the Unemployment and Welfare Effects of the China Shock," NBER Working Papers 27905, National Bureau of Economic Research, Inc.
    4. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2009. "Formación e incrementos de salarios en Colombia: Un estudio microeconómico a partir de una encuesta a nivel de firma," Borradores de Economia 6286, Banco de la Republica.
    5. Sean M. Harkin & Davide S. Mare & Jonathan N. Crook, 2019. "Average pay in banks: do agency problems and bank performance matter?," Review of Quantitative Finance and Accounting, Springer, vol. 53(1), pages 101-122, July.
    6. LIU Yang, 2017. "Effects of Wages and Job Productivity on Job Creation and Destruction: Evidence from Japanese division-level employment data," Discussion papers 17060, Research Institute of Economy, Trade and Industry (RIETI).
    7. Dany Brouillette & Olena Kostyshyna & Natalia Kyui, 2018. "Downward nominal wage rigidity in Canada: Evidence from micro-level data," Canadian Journal of Economics, Canadian Economics Association, vol. 51(3), pages 968-1002, August.
    8. Jan Babecký & Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2010. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Scandinavian Journal of Economics, Wiley Blackwell, vol. 112(4), pages 884-910, December.
    9. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2010. "Incrementos y rigideces de los salarios en Colombia: Un estudio a partir de una encuesta," Revista de Economía del Rosario, Universidad del Rosario, November.
    10. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2009. "Formación e incrementos de salarios en Colombia: Un estudio microeconómico a partir de una encuesta a nivel de firma," Borradores de Economia 582, Banco de la Republica de Colombia.
    11. Pia Rattenhuber, 2014. "Building the minimum wage: the distributional impact of Germany’s first sectoral minimum wage on wages and hours across different wage bargaining regimes," Empirical Economics, Springer, vol. 46(4), pages 1429-1446, June.

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    More about this item

    Keywords

    manufacturing and services; efficiency wages; nominal wage rigidity; Germany;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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