IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Log in (now much improved!) to save this paper

Wage Flexibility and the Great Recession: The Response of the Irish Labour Market

Listed author(s):
  • Aedin Doris

    ()

    (Economics,Finance and Accounting National University of Ireland, Maynooth)

  • Donal O'Neill

    ()

    (Economics,Finance and Accounting National University of Ireland,)

  • Olive Sweetman

    ()

    (Economics,Finance and Accounting National University of Ireland,)

There is considerable debate about the role of wage rigidity in explaining unemployment. Despite a large body of empirical work, no consensus has emerged on the extent of wage rigidity. Previous attempts to empirically examine wage rigidity have been hampered by small samples and measurement error. In this paper we examine nominal wage flexibility in Ireland both in the build up to, and during the Great Recession. The Irish case is particularly interesting because it has been one of the countries most affected by the crisis. Our main analysis is based on earnings data for the entire population of workers in Ireland taken from tax returns, which are free of reporting error. We find a substantial degree of downward wage flexibility in the pre-crisis period. We also observe a significant change in wage dynamics since the crisis began; the proportion of workers receiving wage cuts more than doubled and the proportion receiving wage freezes increased substantially. However, there is considerable heterogeneity in wage changes, with a significant proportion of workers continuing to receive pay rises at the same time as other were receiving pay cuts.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://repec.maynoothuniversity.ie/mayecw-files/N244-13.pdf
Download Restriction: no

Paper provided by Department of Economics, Finance and Accounting, National University of Ireland - Maynooth in its series Economics, Finance and Accounting Department Working Paper Series with number n244-13.pdf.

as
in new window

Length: 31 pages
Date of creation: 2013
Handle: RePEc:may:mayecw:n244-13.pdf
Contact details of provider: Postal:
Maynooth, Co. Kildare

Phone: 353-1-7083728
Fax: 353-1-7083934
Web page: http://www.maynoothuniversity.ie/economics-finance-and-accounting

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as
in new window


  1. M. Druant & S. Fabiani & Gabor Kezdi & Ana Lamo & Fernando Martins & R. Sabbatini, 2009. "How are Firms’ Wages and Prices Linked: Survey Evidence in Europe," Working Papers w200918, Banco de Portugal, Economics and Research Department.
  2. Du Caju, Philip & Kosma, Theodora & Lawless, Martina & Messina, Julián & Rõõm, Tairi, 2013. "Why Firms Avoid Cutting Wages: Survey Evidence from European Firms," Research Technical Papers 03/RT/13, Central Bank of Ireland.
  3. Ziliak, James P. & Hardy, Bradley & Bollinger, Christopher, 2011. "Earnings volatility in America: Evidence from matched CPS," Labour Economics, Elsevier, vol. 18(6), pages 742-754.
  4. 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.
  5. 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.
  6. Holden Steinar & Wulfsberg Fredrik, 2008. "Downward Nominal Wage Rigidity in the OECD," The B.E. Journal of Macroeconomics, De Gruyter, vol. 8(1), pages 1-50, April.
  7. Mary C. Daly & Bart Hobijn & Brian Lucking, 2012. "Why has wage growth stayed strong?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue apr2.
  8. Carneiro, Anabela & Portugal, Pedro & Varejão, José, 2014. "Catastrophic job Destruction during the Portuguese Economic Crisis," Journal of Macroeconomics, Elsevier, vol. 39(PB), pages 444-457.
  9. Lorenz Goette & Uwe Sunde & Thomas Bauer, 2007. "Wage Rigidity: Measurement, Causes and Consequences," Economic Journal, Royal Economic Society, vol. 117(524), pages 499-507, November.
  10. 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.
  11. Dias, Daniel A. & Marques, Carlos Robalo & Martins, Fernando, 2013. "Wage rigidity and employment adjustment at the firm level: Evidence from survey data," Labour Economics, Elsevier, vol. 23(C), pages 40-49.
  12. Galí, Jordi, 2013. "Notes for a New Guide to Keynes (I): Wages, Aggregate Demand, and Employment," CEPR Discussion Papers 9285, C.E.P.R. Discussion Papers.
  13. Petri Böckerman & Seppo Laaksonen & Jari Vainiomäki, 2003. "Who Bear the Burden of Wage Cuts? Evidence From Finland During the 1990s," Working Papers 0321, University of Tampere, School of Management, Economics.
  14. Alessandro Barattieri & Susanto Basu & Peter Gottschalk, 2014. "Some Evidence on the Importance of Sticky Wages," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(1), pages 70-101, January.
  15. Brian Bell & John Reenen, 2014. "Bankers and Their Bonuses," Economic Journal, Royal Economic Society, vol. 124(574), pages 1-21, 02.
  16. Babecký, Jan & Du Caju, Philip & Kosma, Theodora & Lawless, Martina & Messina, Julián & Rõõm, Tairi, 2012. "How do European firms adjust their labour costs when nominal wages are rigid?," Labour Economics, Elsevier, vol. 19(5), pages 792-801.
  17. Thomas Bauer & Holger Bonin & Lorenz Goette & Uwe Sunde, 2007. "Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Micro Data," Economic Journal, Royal Economic Society, vol. 117(524), pages 508-529, November.
  18. 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.
  19. Jordi Gali, 2013. "Notes For A New Guide To Keynes (I): Wages, Aggregate Demand, And Employment," Journal of the European Economic Association, European Economic Association, vol. 11(5), pages 973-1003, October.
  20. Philip Du Caju & Theodora Kosma & Martina Lawless & Julián Messina & Tairi Rõõm, 2015. "Why Firms Avoid Cutting Wages," ILR Review, Cornell University, ILR School, vol. 68(4), pages 862-888, August.
  21. Richard Blundell & Claire Crawford & Wenchao Jin, 2014. "What Can Wages and Employment Tell Us about the UK's Productivity Puzzle?," Economic Journal, Royal Economic Society, vol. 0(576), pages 377-407, 05.
  22. Christoph Knoppik & Thomas Beissinger, 2009. "Downward nominal wage rigidity in Europe: an analysis of European micro data from the ECHP 1994–2001," Empirical Economics, Springer, vol. 36(2), pages 321-338, May.
  23. Francesco Devicienti & Agata Maida & Paolo Sestito, 2007. "Downward Wage Rigidity in Italy: Micro-Based Measures and Implications," Economic Journal, Royal Economic Society, vol. 117(524), pages 530-552, November.
  24. Alan Barrett & Séamus McGuiness, 2012. "The Irish Labour Market and the Great Recession," ifo DICE Report, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, vol. 10(2), pages 27-33, 08.
  25. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
  26. Elsby, Michael W.L., 2009. "Evaluating the economic significance of downward nominal wage rigidity," Journal of Monetary Economics, Elsevier, vol. 56(2), pages 154-169, March.
  27. RichardD. Barwell & MarkE. Schweitzer, 2007. "The Incidence of Nominal and Real Wage Rigidities in Great Britain: 1978-98," Economic Journal, Royal Economic Society, vol. 117(524), pages 553-569, November.
  28. Petri Böckerman, 2007. "Who bears the burden of wage cuts? Evidence from Finland during the 1990s," International Journal of Manpower, Emerald Group Publishing, vol. 28(2), pages 100-121, May.
  29. 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.
  30. Thomas Beissinger & Christoph Knoppik, 2001. "Downward Nominal Rigidity in West German Earnings, 1975-95," German Economic Review, Verein für Socialpolitik, vol. 2(4), pages 385-417, November.
  31. Bergin, Adele & Kelly, Elish & McGuinness, Seamus, 2012. "Explaining Changes in Earnings and Labour Costs During the Recession," Papers EC9, Economic and Social Research Institute (ESRI).
  32. Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages 176-195, March.
  33. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:may:mayecw:n244-13.pdf. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.