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Micro-level Rigidity vs. Macro-level Flexibility: Lessons from Finland

Author

Listed:
  • Petri Böckerman

    (Labour Institute for Economic Research)

  • Seppo Laaksonen

    (University of Helsinki)

  • Jari Vainiomäki

    (School of Management, University of Tampere)

Abstract

This paper explores the wage flexibility in Finland. The study covers the private sector workers by using three data sets from the payroll records of employers' associations. The data span the period 1985-2001. The results reveal that there has been macroeconomic flexibility in the labour market. Average real wages declined during the early 1990's depression and a large proportion of workers experienced real wage cuts. However, the evidence based on individual-level wage change distributions shows that especially real wages are rigid. In particular, individual-level wage changes have regained the high levels of real rigidity during the late 1990s that revailed in the 1980s, despite the continued high (but declining) level of unemployment.

Suggested Citation

  • Petri Böckerman & Seppo Laaksonen & Jari Vainiomäki, 2009. "Micro-level Rigidity vs. Macro-level Flexibility: Lessons from Finland," Working Papers 0972, Tampere University, Faculty of Management and Business, Economics.
    • Handle: RePEc:tam:wpaper:0972
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    File URL: http://urn.fi/urn:isbn:978-951-44-7720-1
    File Function: First version, 2009
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    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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