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The Rationale for Wage Rigidity: Survey Evidence from German and US Firms

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  • Pfeiffer, Friedhelm
  • Franz, Wolfgang

Abstract

The study provides evidence for the rationale of wage rigidity in Germany compared to the United States. Based on a survey of 801 firms, we extend the study of Campbell and Kanlani (1997, this journal) by using more thorough econometric methods, for example, and find strong support for explanations based on labor union contracts and implicit wages for Germany. Furthermore, survey respondents indicated that labor union contracts and implicit contracts are important reasons for wage rigidity for the (less) skilled. Specific human capital and negative signals for new hires are important reasons for the highly skilled. In contrast to the US experience for German firms insider-outsider behavior, labor union contracts and specific human capital seem to be more important explanations of wage rigidity.

Suggested Citation

  • Pfeiffer, Friedhelm & Franz, Wolfgang, 2002. "The Rationale for Wage Rigidity: Survey Evidence from German and US Firms," ZEW Discussion Papers 02-60, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:551
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    References listed on IDEAS

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    Cited by:

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    3. Agell, Jonas & Bennmarker, Helge, 2007. "Wage incentives and wage rigidity: A representative view from within," Labour Economics, Elsevier, vol. 14(3), pages 347-369, June.
    4. Wolfgang Franz, 2005. "Will the (German) NAIRU Please Stand Up?," German Economic Review, Verein für Socialpolitik, vol. 6(2), pages 131-153, May.
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    6. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2009. "Formación e incrementos de salarios en Colombia: Un estudio microeconómico a partir de una encuesta a nivel de firma," Borradores de Economia 582, Banco de la Republica de Colombia.

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    More about this item

    Keywords

    wage rigidity; labour union contracts; efficiency wage theory; implicit contract theory;
    All these keywords.

    JEL classification:

    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts

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