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Stick Wages in a Developing Country: Lessons from Structured Interviews in Pakistan

Author

Listed:
  • Waqas Ahmed

    (State Bank of Pakistan)

  • Muhammad Ali Choudhary

    (State Bank of Pakistan)

  • Sajawal Khan

    (State Bank of Pakistan)

  • Saima Naeem

    (State Bank of Pakistan)

  • Gylfi Zoega

    (Birkbeck College, University of London)

Abstract

We contribute to the growing literature on the empirical evidence for wage rigidity using structured interviews for Pakistan. The novelty of the study consists of using data from a developing country which provides the basis for a comparison with studies performed in the developed countries. Our sample of 1189 managers finds widespread support for downward nominal wage rigidity while real wage rigidity is less pronounced although still present. Concerns about the adverse effects of wage reductions on effort, morale, the most productive workers leaving (adverse selection) and the minimum-wage largely explain the presence of nominal wage rigidity. All sectors, irrespective of time, take minimum-wage changes into account when setting wages so that the law very much sets wage expectations.

Suggested Citation

  • Waqas Ahmed & Muhammad Ali Choudhary & Sajawal Khan & Saima Naeem & Gylfi Zoega, 2013. "Stick Wages in a Developing Country: Lessons from Structured Interviews in Pakistan," SBP Working Paper Series 55, State Bank of Pakistan, Research Department.
  • Handle: RePEc:sbp:wpaper:55
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    Cited by:

    1. Ahmed, Waqas & Choudhary, M. Ali & Khan, Sajawal & Naeem, Saima & Zoega, Gylfi, 2014. "Determinants of wage stickiness in a developing economy," Economic Modelling, Elsevier, vol. 38(C), pages 296-304.
    2. Muhammad Ali Choudhary & Farooq Pasha, 2013. "The RBC View of Pakistan: A Declaration of Stylized Facts and Essential Models," SBP Working Paper Series 56, State Bank of Pakistan, Research Department.
    3. Antonia C. Settle, 2018. "The Informal Economy as a Site of Liquidity: Pakistan's Land Market," Development and Change, International Institute of Social Studies, vol. 49(5), pages 1291-1313, September.

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    More about this item

    Keywords

    Wage rigidity; structured interviews;

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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