IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

How do firms adjust their wage bill in Belgium ? A decomposition along the intensive and extensive margins

  • Catherine Fuss


    (National Bank of Belgium, Research Department
    Université Libre de Bruxelles)

This paper decomposes wage bill changes at the firm level into components due to wage changes, and components due to net flows of employment. The analysis relies on an administrative employer-employee dataset of individual annual earnings matched with firms' annual accounts for Belgium over the period 1997-2001. Results point to asymmetric behaviour depending on economic conditions. On average, wage bill contractions result essentially from employment cuts in spite of wage increases. Wage growth of job stayers is moderated but still positive; and wages of entrants compared with those of incumbents are no lower. The labour force cuts are achieved through both reduced entries and increased exits. Higher exits may be due to more layoffs, especially in smaller firms, and wider use of early retirement, especially in manufacturing. In addition, the paper points up the role of overtime hours, temporary unemployment and interim workers in adapting to short-run fluctuations.

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:
Download Restriction: no

Paper provided by National Bank of Belgium in its series Working Paper Research with number 127.

in new window

Length: 40 pages
Date of creation: Jan 2008
Date of revision:
Handle: RePEc:nbb:reswpp:200801-31
Contact details of provider: Postal:
Boulevard de Berlaimont 14, B-1000 Bruxelles

Phone: (+ 32) (0) 2 221 25 34
Fax: (+ 32) (0) 2 221 31 62
Web page:

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. Luigi Guiso & Luigi Pistaferri & Fabiano Schivardi, 2001. "Insurance within the Firm," Temi di discussione (Economic working papers) 414, Bank of Italy, Economic Research and International Relations Area.
  2. Steve J. Davis & John Haltiwanger, 1991. "Gross job creation, gross job destruction and employment reallocation," Working Paper Series, Macroeconomic Issues 91-5, Federal Reserve Bank of Chicago.
  3. Philip Du Caju & Catherine Fuss & Ladislav Wintr, 2007. "Downward wage rigidity for different workers and firms : an evaluation for Belgium using the IWFP procedure," Working Paper Research 124, National Bank of Belgium.
  4. 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.
  5. Russell W. Cooper & John Haltiwanger & Jonathan L. Willis, 2003. "Dynamics of labor demand : evidence from plant-level observations and aggregate implications," Research Working Paper RWP 03-12, Federal Reserve Bank of Kansas City.
  6. Ernst Fehr & Lorenz Goette, 2004. "Robustness And Real Consequences Of Nominal Wage Rigidity," Macroeconomics 0409025, EconWPA.
  7. Blanchard, Olivier & Galί, Jordi, 2006. "A New Keynesian Model with Unemployment," Kiel Working Papers 1335, Kiel Institute for the World Economy (IfW).
  8. Stephen Nickell & Glenda Quintini, 2001. "Nominal Wage Rigidity and the Rate of Inflation," CEP Discussion Papers dp0489, Centre for Economic Performance, LSE.
  9. Caballero, Ricardo J & Engel, Eduardo M R A & Haltiwanger, John, 1997. "Aggregate Employment Dynamics: Building from Microeconomic Evidence," American Economic Review, American Economic Association, vol. 87(1), pages 115-37, March.
  10. Gomez-Salvador, Ramon & Messina, Julian & Vallanti, Giovanna, 2004. "Gross job flows and institutions in Europe," Labour Economics, Elsevier, vol. 11(4), pages 469-485, August.
  11. Paul J. Devereux & Joseph G. Altonji, 2000. "The extent and consequences of downward nominal wage rigidity," Open Access publications 10197/311, School of Economics, University College Dublin.
  12. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
  13. Carl M. Campbell III & Kunal S. Kamlani, 1997. "The Reasons for Wage Rigidity: Evidence from a Survey of Firms," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 759-789.
  14. Alfred Kleinknecht & Remco Oostendorp & Menno Pradhan & C. W. M. Naastepad, 2006. "Flexible Labour, Firm Performance and the Dutch Job Creation Miracle," International Review of Applied Economics, Taylor & Francis Journals, vol. 20(2), pages 171-187.
  15. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie Ward, 2006. "The interaction of labor markets and inflation: analysis of micro data from the International Wage Flexibility Project," Proceedings, Federal Reserve Bank of San Francisco.
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:nbb:reswpp:200801-31. 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.