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Wage adjustment and employment in Europe

Author

Listed:
  • Petra Marotzke
  • Robert Anderton
  • Ana Bairrao
  • Clémence Berson
  • Peter Tóth

Abstract

We explore the impact of wage adjustment on employment with a focus on the role of downward nominal wage rigidities. We use a harmonised survey dataset, which covers 25 European countries in the period 2010-2013. The main advantages of the data are firm-level information on the change in economic conditions and collective pay agreements. Our findings confirm the presence of wage rigidities in Europe: first, collective pay agreements reduce the probability of downward wage adjustment; second, the rise in the probability of downward base wage responses to a decrease in demand is significantly smaller than the rise in the probability of an upward wage response to an increase in demand. Estimation results point to a negative effect of downward wage rigidities on employment at the firm level.

Suggested Citation

  • Petra Marotzke & Robert Anderton & Ana Bairrao & Clémence Berson & Peter Tóth, 2016. "Wage adjustment and employment in Europe," Discussion Papers 2016-19, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:16/19
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    References listed on IDEAS

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    Cited by:

    1. Mario Izquierdo & Juan Francisco Jimeno & Theodora Kosma & Ana Lamo & Stephen Millard & Tairi Rõõm & Eliana Viviano, 2017. "Labour market adjustment in Europe during the crisis: microeconomic evidence from the Wage Dynamics Network survey," Occasional Papers 1704, Banco de España;Occasional Papers Homepage.
    2. repec:bfr:quarte:2016:45:01 is not listed on IDEAS
    3. repec:bfr:quarte:2017:45:04 is not listed on IDEAS
    4. repec:bfr:quarte:2017:45:05 is not listed on IDEAS
    5. repec:bfr:quarte:2016:45:05 is not listed on IDEAS
    6. repec:bfr:quarte:2017:45:06 is not listed on IDEAS
    7. repec:bfr:quarte:2017:45:03 is not listed on IDEAS
    8. repec:bfr:quarte:2016:45:02 is not listed on IDEAS
    9. repec:bfr:quarte:2016:45:03 is not listed on IDEAS
    10. repec:bfr:quarte:2016:45:06 is not listed on IDEAS
    11. repec:bfr:quarte:2017:45:02 is not listed on IDEAS
    12. C. Berson & C. Malgouyres & S. Ray, 2017. "The labour market: institutions and reforms Summary of the third Labour Market Conference held in Aix-en-Provence on 1 and 2 December 2016 by the Aix-Marseille School of Economics and the Banque de Fr," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 45, pages 45-52, Spring.
    13. repec:bfr:quarte:2017:45:01 is not listed on IDEAS
    14. repec:bfr:quarte:2016:45:04 is not listed on IDEAS

    More about this item

    Keywords

    Wage rigidity; Employment; Demand shocks;

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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