Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms
By Jan Babecký, P. D. Caju, Theodora Kosma, M. Lawless, Julián Messina, Tairi Rõõm. Social Science Research Network, 2009
299 citations recorded by the source corpus.
It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage rigidity in both real and nominal terms. The authors analyse which firm-level and institutional factors are associated with wage rigidity. The results indicate that it is related to workforce composition at the establishment level in a manner that is consistent with related theoretical models (e.g. efficiency wage theory, insider-outsider theory). The analysis also finds that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations.
Subfields: Economics and Econometrics, General Health Professions, Public Administration
View Paper: https://www.semanticscholar.org/paper/ae17d3c9ebadf20cc4fd67301f07cb1540b833ee
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Citations in the corpus
- Downward wage rigidity and business cycle asymmetries (2013, background): “Indeed, Babecký et al. (2010) find that bonus payments and skill composition serve as important additional margins of cost adjustment.”
- The Greek financial crisis: growing imbalances and sovereign spreads (2012, unknown): “1 At its inception on January 1, 1999, the euro area consisted of eleven countries. Five countries have joined the euro area after Greece’s entry, bringing the total number of members in 2011 to seventeen. For a detailed assessment of the euro area, see De Grauwe (2007). 2 These advantages of a comm”