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Understanding sectoral differences in downward real wage rigidity : workforce composition, institutions, technology and competition

Listed author(s):
  • Philip Du Caju

    ()

    (National Bank of Belgium, Research Department)

  • Catherine Fuss

    ()

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

  • Ladislav Wintr

    ()

    (Central Bank of Luxembourg, Economics and Research Department)

This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, competition, technology and wage-bargaining institutions. We adopt the measure of downward real wage rigidity (DRWR) developed by Dickens and Goette (2006) and rely on a large administrative matched employer-employee dataset for Belgium over the period 1990-2002. Firstly, our results indicate that DRWR is significantly higher for white-collar workers and lower for older workers and for workers with higher earnings and bonuses. Secondly, beyond labour force composition effects, sectoral differences in DRWR are related to competition, firm size, technology and wage-bargaining institutions. We find that wages are more rigid in more competitive sectors, in labour-intensive sectors, and in sectors with predominant centralised wagesetting at the sector level as opposed to firm-level wage agreements.

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Paper provided by National Bank of Belgium in its series Working Paper Research with number 156.

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Length: 43 pages
Date of creation: Feb 2009
Handle: RePEc:nbb:reswpp:200902-18
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  6. Boone, J. & van Ours, J.C. & van der Wiel, H.P., 2007. "How (Not) to Measure Competition," Discussion Paper 2007-014, Tilburg University, Tilburg Law and Economic Center.
  7. Babecký, Jan & Du Caju, Philip & Kosma, Theodora & Lawless, Martina & Messina, Julián & Rõõm, Tairi, 2009. "Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms," Working Paper Series 1105, European Central Bank.
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