Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms

We present new evidence from a unique survey of firms across Europe on downward wage rigidity in both real and nominal terms. Our results indicate that wage rigidities are related to workforce composition in a manner that is consistent with related theoretical models. We also find that wage rigidity...

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Bibliographic Details
Published in:The Scandinavian journal of economics 2010-12, Vol.112 (4), p.884-910
Main Authors: Babecký, Jan, Du Caju, Philip, Kosma, Theodora, Lawless, Martina, Messina, Julián, Rõõm, Tairi
Format: Article
Language:English
Subjects:
Aggregate Human Capital E240
Analysis
C81
Collective bargaining
Economic indices
Economic theory
Economics of Contract: Theory D860
Employment
Europe
European Union
Intergenerational Income Distribution
International agreements
J30
J31
J32
Labor Contracts J410
Labor Law K310
Labor market
Labour law
Nominal rigidities
Nominal wages
Price rigidities
Real rigidities
Real wages
Studies
Survey data
Unemployment
Wage areas
Wage Differentials J310
Wage indexation
Wage Level and Structure
Wage levels
Wage rigidity
Wage surveys
Wages
Wages & salaries
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Summary:We present new evidence from a unique survey of firms across Europe on downward wage rigidity in both real and nominal terms. Our results indicate that wage rigidities are related to workforce composition in a manner that is consistent with related theoretical models. We also find 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.
ISSN:0347-0520
1467-9442
1467-9442
DOI:10.1111/j.1467-9442.2010.01624.x