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Nominal wage flexibility and institutions: preliminary micro-evidence from the Europanel

  • Orietta DESSY


This paper analyses wage dynamics at individual level using the European Community Household Panel data. We compare yearly wage changes of full-time employees staying in the same firm for twelve European countries during the 1994-96 time-period. For all the European countries we find evidence of nominal wage rigidity. The percentage of employees receiving no wage changes is different across countries, with Germany and Ireland ranking at the top and the bottom respectively. At the same time, nominal wage cuts are not rare. We therefore consider the impact of the bargaining structure and institutions in the European labor markets on the extent of nominal wage fexibility observed.

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Paper provided by Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano in its series Departmental Working Papers with number 2004-17.

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Date of creation: 01 Jan 2004
Date of revision:
Handle: RePEc:mil:wpdepa:2004-17
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  1. Nickell, S. & Layard, R., 1997. "Labour Market Institutions and Economic Performance," Papers 23, Centre for Economic Performance & Institute of Economics.
  2. Groth, Charlotta & Johansson, Åsa, 2002. "Bargaining Structure and Nominal Wage Flexibility," Seminar Papers 709, Stockholm University, Institute for International Economic Studies.
  3. Stephen Nickell & Glenda Quintini, 2001. "Nominal wage rigidity and the rate of inflation," LSE Research Online Documents on Economics 20131, London School of Economics and Political Science, LSE Library.
  4. Steinar Holden, 2002. "The Costs of Price Stability - Downward Nominal Wage Rigidity in Europe," NBER Working Papers 8865, National Bureau of Economic Research, Inc.
  5. David Card & Dean Hyslop, 1997. "Does Inflation "Grease the Wheels of the Labor Market"?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 71-122 National Bureau of Economic Research, Inc.
  6. Ernst Fehr & Lorenz Goette, 2004. "Robustness And Real Consequences Of Nominal Wage Rigidity," Macroeconomics 0409025, EconWPA.
  7. Ernst Fehr & Lorenz Goette, 2007. "The Robustness and Real Consequences of Nominal Wage Rigidity," Kiel Working Papers 1343, Kiel Institute for the World Economy.
  8. Franco Peracchi, 2002. "The European Community Household Panel: A review," Empirical Economics, Springer, vol. 27(1), pages 63-90.
  9. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
  10. Bewley, Truman F., 1998. "Why not cut pay?," European Economic Review, Elsevier, vol. 42(3-5), pages 459-490, May.
  11. Robert J. Flanagan, 1999. "Macroeconomic Performance and Collective Bargaining: An International Perspective," Journal of Economic Literature, American Economic Association, vol. 37(3), pages 1150-1175, September.
  12. Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages C176-95, March.
  13. McLaughlin, Kenneth J., 1994. "Rigid wages?," Journal of Monetary Economics, Elsevier, vol. 34(3), pages 383-414, December.
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