Downward Nominal Wage Rigidity in the OECD

By Steinar Holden, Fredrik Wulfsberg. Social Science Research Network, 2008

237 citations recorded by the source corpus.

Recent microeconomic studies have documented extensive downward nominal wage rigidity (DNWR) for job stayers in many OECD countries, but critics argue that the effect might be undone by compositional changes and flexibility in wages of new entrants. Using data for hourly nominal wages at industry level, we explore the existence of DNWR on industry wages in 19 OECD countries, over the period 1973-1999. We propose a novel method to detect DNWR. We reject the hypothesis of no DNWR in the overall sample. The fraction of wage cuts prevented due to DNWR has fallen over time, from 61 percent in the 1970s to 16 percent in the late 1990s, but the number of industries affected by DNWR has increased. DNWR is more prevalent when unemployment is low and union density is high. Strict employment protection legislation also leads to fewer wage cuts.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/a0c0114bcc3b3a2751eb429456df32739d510634

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Citations in the corpus

Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms (2009, unknown): “The studies by Dickens et al. (2007) and Holden and Wulfsberg (2007, 2008) find that higher wage rigidity is associated with higher union density.”
Liquidity Traps and Jobless Recoveries (2017, background): “The assumption of nominal rather than real wage rigidity is motivated by an empirical literature suggesting that the former type of rigidity is pervasive (see, for instance, Gottschalk 2005; Barattieri, Basu, and Gottschalk 2014; and Daly, Hobijn, and Lucking 2012 for the United States; Holden and W”