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Labor Cost Adjustment: Evidence From a Survey of Slovak Firms

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  • Marianna Cervena

    () (National Bank of Slovakia, Research Department)

Abstract

Building on a unique survey of how Slovak firms adjust wages and prices, this paper studies the reduction of labour costs in two forms: base wage cuts and alternative margins for labour cost reduction. Anecdotal evidence suggests that wage-cutting by firms occurs more frequently in Slovakia than in any other country and that the use of alternative margins for labour cost reduction is also quite prevalent in Slovakia. Regression results support the strong relationship between the use of alternative margins and wage rigidities. I find that the use of any alternative margin is on average 30% more likely in firms facing nominal wage rigidity that in firms with flexible wages.

Suggested Citation

  • Marianna Cervena, 2012. "Labor Cost Adjustment: Evidence From a Survey of Slovak Firms," Working and Discussion Papers WP 4/2012, Research Department, National Bank of Slovakia.
  • Handle: RePEc:svk:wpaper:1019
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    File URL: http://www.nbs.sk/_img/Documents/PUBLIK/WP_4-2012.pdf
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    References listed on IDEAS

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    1. Filippo Altissimo & Michael Ehrmann & Frank Smets, 2006. "Inflation persistence and price-setting behaviour in the euro area – a summary of the IPN evidence," Occasional Paper Series 46, European Central Bank.
    2. David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, January.
    3. Pavel Gertler, 2010. "The wage curve: A panel data view of labour market segments," Working and Discussion Papers WP 3/2010, Research Department, National Bank of Slovakia.
    4. Patrick Lünnemann & Ladislav Wintr, 2009. "Wages are flexible, aren?t they? evidence from monthly micro wage data," BCL working papers 39, Central Bank of Luxembourg.
    5. Keeney, Mary & Lawless, Martina, 2010. "Wage setting and wage flexibility in Ireland - Results from a firm-level survey," Working Paper Series 1181, European Central Bank.
    6. Stephen Nickell, 1997. "Unemployment and Labor Market Rigidities: Europe versus North America," Journal of Economic Perspectives, American Economic Association, vol. 11(3), pages 55-74, Summer.
    7. Pavel Gertler & Matúš Senaj, 2010. "Downward Wage Rigidities in Slovakia," Czech Economic Review, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, vol. 4(1), pages 079-101, March.
    8. Ian Babetskii, 2006. "Aggregate Wage Flexibility in Selected New EU Member States," Working Papers 2006/1, Czech National Bank, Research Department.
    9. Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, University of Chicago Press, vol. 71, pages 280-280.
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    Cited by:

    1. Peter Toth & Katarina Valkova, 2015. "Wage Rigidities and Jobless Recovery in Slovakia: New Survey Evidence," Working and Discussion Papers OP 3/2015, Research Department, National Bank of Slovakia.

    More about this item

    Keywords

    nominal and real wage rigidity; alternative margins for labour cost cutting; survey evidence;

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access

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