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Wage adjustment and employment in Europe

Listed author(s):
  • Petra Marotzke
  • Robert Anderton
  • Ana Bairrao
  • Clémence Berson
  • Peter Tóth

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.

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File URL: http://www.nottingham.ac.uk/gep/documents/papers/2016/2016-19.pdf
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Paper provided by University of Nottingham, GEP in its series Discussion Papers with number 2016-19.

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Date of creation: 2016
Handle: RePEc:not:notgep:16/19
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School of Economics University of Nottingham University Park Nottingham NG7 2RD

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Web page: http://www.nottingham.ac.uk/gep/index.aspx

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