Downward Nominal Wage Rigidity in Europe

By Steinar Holden, Fredrik Wulfsberg. Social Science Research Network, 2004

228 citations recorded by the source corpus.

This paper explores the existence of downward nominal wage rigidity (DNWR) in the industry sectors of 14 European countries, over the period 1973–1999, using a data set of hourly nominal wages at industry level. Based on a novel nonparametric statistical method, which allows for country and year-specific variation in both the median and the dispersion of industry wage changes, we reject the hypothesis of no DNWR. The fraction of wage cuts prevented due to DNWR has fallen over time, from 70 percent in the 1970s to 20 percent in the 1990s, but the number of industries affected by DNWR has increased. Wage cuts are less likely in countries and years with high inflation, low unemployment, high union density and strict employment protection legislation.

Subfields: Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/d72ebb4af5faa7315bd1f1dc41cca8e8d9e2cf16

Citations in the corpus

• The Inflation-Output Trade-Off with Downward Wage Rigidities (2011, unknown): “…Ana Maria Loboguerrero and Ugo Panizza (2006) find that the grease effect of inflation is more relevant in countries with highly regulated labor markets, in line with the fact that wage rigidities are stronger in countries with heavier labor market distortions (Holden 2004; Dickens et al. 2007).”
• Downward Nominal Wage Rigidity in the OECD (2008, unknown): “As predicted by the theoretical framework of Holden (2004), we find that inflation, the strictness of employment protection legislation and union density all lead to stronger DNWR: in country-year samples with high inflation, strict employment protection legislation and high union density, the…”