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Labor Cost Adjustment: Evidence From a Survey of Slovak Firms

  • Marianna Cervena

    ()

    (National Bank of Slovakia, Research Department)

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.

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Paper provided by Research Department, National Bank of Slovakia in its series Working and Discussion Papers with number WP 4/2012.

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Length: 28 pages
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:svk:wpaper:1019
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  1. Keeney, Mary J. & Lawless, Martina, 2010. "Wage Setting and Wage Flexibility in Ireland:Results from a Firm-level Survey," Research Technical Papers 1/RT/10, Central Bank of Ireland.
  2. Ian Babetskii, 2006. "Aggregate Wage Flexibility in Selected New EU Member States," Working Papers 2006/1, Czech National Bank, Research Department.
  3. 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.
  4. Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 215-35.
    • David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, June.
  5. Robert Mundell, 1963. "Inflation and Real Interest," Journal of Political Economy, University of Chicago Press, vol. 71, pages 280.
  6. 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.
  7. 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.
  8. 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.
  9. 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.
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