How Wages Change: Micro Evidence from the International Wage Flexibility Project

By William T. Dickens, Lorenz F. Goette, E. Groshen, Steinar Holden, Julián Messina, Mark E. Schweitzer, J. Turunen, M. Ward. Social Science Research Network, 2007

571 citations recorded by the source corpus.

How do the complex institutions involved in wage setting affect wage changes? The International Wage Flexibility Project provides new microeconomic evidence on how wages change for continuing workers. We analyze individuals’ earnings in 31 different data sets from sixteen countries, from which we obtain a total of 360 wage change distributions. We find a remarkable amount of variation in wage changes across workers. Wage changes have a notably non-normal distribution; they are tightly clustered around the median and also have many extreme values. Furthermore, nearly all countries show asymmetry in their wage distributions below the median. Indeed, we find evidence of both downward nominal and real wage rigidities. We also find that the extent of both these rigidities varies substantially across countries. Our results suggest that variations in the extent of union presence in wage bargaining play a role in explaining differing degrees of rigidities among countries.

Subfields: Economics and Econometrics, General Health Professions

View Paper: https://www.semanticscholar.org/paper/e43f31d571a7ac5d9cb21a5cb64a1cff694c0c1b

Citations in the corpus

• Downward Nominal Wage Rigidity in the OECD (2008, unknown): “The International Wage Flexibility Project (Dickens et al., 2007a) finds that, for all 16 countries studied, dnwr prevents wage cuts from taking place, with the fraction of wage cuts prevented being in the range of 4–58 percent (see literature review in section 1). However, when it comes to identify”
• Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms (2009, unknown): “3 Analysis of the union contracts negotiated at different levels (firm-level versus higher-level bargaining contracts) implies that firm-level contracts are a more likely source of real wage rigidity in centralised wage-setting environments.”