IDEAS home Printed from https://ideas.repec.org/p/rba/rbardp/rdp2000-08.html
   My bibliography  Save this paper

Nominal Wage Rigidity in Australia

Author

Listed:
  • Jacqueline Dwyer

    (Reserve Bank of Australia)

  • Kenneth Leong

    (Reserve Bank of Australia)

Abstract

The existence of downward nominal price and wage rigidity has been used to argue against the adoption of zero inflation targets. A good deal is known about the nature and extent of price flexibility in Australia. However, little is known about nominal wage flexibility since investigations have been hindered by a lack of suitable data. Using a unique and unpublished microdata set, we find strong evidence of downward nominal wage rigidity. The idea that firms are able to circumvent wage rigidity by varying broader forms of remuneration is not supported by our study. We find that these broad measures are still skewed away from pay cuts, though to a lesser extent than wages. Not all of the observed rigidity is binding, though, since skewness away from wage cuts appears to occur for reasons other than downward wage rigidity. However, the extent of rigidity we do observe lends support to the pursuit of small positive rates of inflation as an objective of monetary policy.

Suggested Citation

  • Jacqueline Dwyer & Kenneth Leong, 2000. "Nominal Wage Rigidity in Australia," RBA Research Discussion Papers rdp2000-08, Reserve Bank of Australia.
  • Handle: RePEc:rba:rbardp:rdp2000-08
    as

    Download full text from publisher

    File URL: http://www.rba.gov.au/publications/rdp/2000/pdf/rdp2000-08.pdf
    Download Restriction: no

    Other versions of this item:

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Brzoza-Brzezina, Michal & Socha, Jacek, 2006. "Downward nominal wage rigidity in Poland," MPRA Paper 843, University Library of Munich, Germany, revised Nov 2006.
    2. Thomas Beissinger & Chritoph Knoppik, 2005. "Sind Nominallöhne starr? Neuere Evidenz und wirtschaftspolitische Implikationen," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(2), pages 171-188, May.
    3. Knoppik, Christoph, 2007. "Skewness and Location of Distributions of Wage Change Rates in the Presence of Downward Nominal Wage Rigidity," University of Regensburg Working Papers in Business, Economics and Management Information Systems 420, University of Regensburg, Department of Economics.
    4. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2009. "Rigideces de los salarios a la baja en Colombia: Evidencia empírica a partir de una muestra de salarios a nivel de firma," Borradores de Economia 571, Banco de la Republica de Colombia.
    5. Barno Blaes, 2008. "Abwärtsnominal- und Tariflohnstarrheit in Deutschland," Working Papers 049, Bavarian Graduate Program in Economics (BGPE).
    6. Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ramírez G., "undated". "Are wages rigid in Colombia?: Empirical evidence based on a sample of wages at the firm level," Borradores de Economia 571i, Banco de la Republica de Colombia.
    7. Anne-Marie Brook & Özer Karagedikli & Dean Scrimgeour, 2002. "An optimal inflation target for New Zealand: lessons from the literature," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 65, September.
    8. Dias, Daniel A. & Marques, Carlos Robalo & Martins, Fernando, 2013. "Wage rigidity and employment adjustment at the firm level: Evidence from survey data," Labour Economics, Elsevier, vol. 23(C), pages 40-49.
    9. Sara Gabriela Castellanos Pascacio & Rodrigo García Verdú & David Kaplan, 2004. "Wage Rigidities in Mexico: Evidence from the Administrative Records of the Mexican Social Security Institute (Instituto Mexicano del Seguro Social)," Working Papers 2004-03, Banco de México.
    10. Barno Blaes, 2008. "Ausmaß und reale Konsequenzen nach unten starrer Nominallöhne," Working Papers 048, Bavarian Graduate Program in Economics (BGPE).
    11. Pierre Fortin & George A. Akerlof & William T. Dickens & George L. Perry, 2002. "Inflation and Unemployment in the U.S. and Canada: A Common Framework," Cahiers de recherche du Département des sciences économiques, UQAM 20-16, Université du Québec à Montréal, Département des sciences économiques.
    12. Fernando Martins, 2013. "Survey evidence on price and wage rigidities in Portugal," Working Papers w201312, Banco de Portugal, Economics and Research Department.
    13. Castellanos, Sara G. & Garcia-Verdu, Rodrigo & Kaplan, David S., 2004. "Nominal wage rigidities in Mexico: evidence from social security records," Journal of Development Economics, Elsevier, vol. 75(2), pages 507-533, December.
    14. Coleman, Simeon, 2012. "Where Does the Axe Fall? Inflation Dynamics and Poverty Rates: Regional and Sectoral Evidence for Ghana," World Development, Elsevier, vol. 40(12), pages 2454-2467.
    15. Florian Huber & Magdalena Petrovska, 2015. "Price and Wage Rigidities in the Republic of Macedonia: Survey Evidence from Micro- Level Data," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 49-64.
    16. repec:cml:incocp:2sp-15 is not listed on IDEAS
    17. Yi-Ping Tseng, 2001. "Individuals’ Wage Changes in Australia 1997-2000," Melbourne Institute Working Paper Series wp2001n04, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
    18. Fernando Martins, 2015. "What Survey Data Reveal about Price and Wage Rigidity in Portugal," LABOUR, CEIS, vol. 29(3), pages 291-309, September.

    More about this item

    Keywords

    nominal wage rigidity; skewness away from wage cuts;

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rba:rbardp:rdp2000-08. 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: (Paula Drew) or (Rebekah McClure). General contact details of provider: http://edirc.repec.org/data/rbagvau.html .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.