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Who bear the burden of wage cuts? Evidence from Finland during the 1990s

Author

Listed:
  • Petri Böckerman

    (Labour Institute for Economic Research)

  • Seppo Laaksonen

    (University of Tampere & University of Helsinki)

  • Jari Vainiomäki

    (University of Tampere)

Abstract

This paper explores the incidence of nominal and real wage cuts in the Finnish private sector during the 1990s. Centralized wage freezes together with a positive inflation rate produced real wage cuts for a large proportion of workers during the worst recession years of the early 1990s. In this sense, centralized bargaining shaped the adjustment. The results from micro data reveal that the full-time workers have had a lower likelihood of wage cuts compared with part-time workers. Declines in wages have also been more common in small plants. In addition, there is an important transitory component in wage cuts.

Suggested Citation

  • Petri Böckerman & Seppo Laaksonen & Jari Vainiomäki, 2005. "Who bear the burden of wage cuts? Evidence from Finland during the 1990s," Labor and Demography 0504009, EconWPA.
  • Handle: RePEc:wpa:wuwpla:0504009
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    References listed on IDEAS

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    3. Yellen, Janet L, 1984. "Efficiency Wage Models of Unemployment," American Economic Review, American Economic Association, vol. 74(2), pages 200-205, May.
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    5. Erkki Koskela & Roope Uusitalo, 2003. "The Un-Intended Convergence: How the Finnish Unemployment Reached the European Level," CESifo Working Paper Series 878, CESifo Group Munich.
    6. Stephen Nickell & Glenda Quintini, 2003. "Nominal wage rigidity and the rate of inflation," Economic Journal, Royal Economic Society, vol. 113(490), pages 762-781, October.
    7. Malcomson, James M., 1999. "Individual employment contracts," Handbook of Labor Economics,in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 3, chapter 35, pages 2291-2372 Elsevier.
    8. Smith, Jennifer C, 2000. "Nominal Wage Rigidity in the United Kingdom," Economic Journal, Royal Economic Society, vol. 110(462), pages 176-195, March.
    9. Holden, Steinar, 1994. "Wage bargaining and nominal rigidities," European Economic Review, Elsevier, vol. 38(5), pages 1021-1039, May.
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    Cited by:

    1. Aedín Doris & Donal O’Neill & Olive Sweetman, 2015. "Wage flexibility and the great recession: the response of the Irish labour market," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 4(1), pages 1-24, December.
    2. Boris Hirsch & Thomas Zwick, 2015. "How Selective Are Real Wage Cuts? A Micro-analysis Using Linked Employer–Employee Data," LABOUR, CEIS, vol. 29(4), pages 327-347, December.

    More about this item

    Keywords

    micro-level; wages; adjustment;

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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