Wage Rigidity

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Supreet Kaur - One of the best experts on this subject based on the ideXlab platform.

  • nominal Wage Rigidity in village labor markets
    The American Economic Review, 2019
    Co-Authors: Supreet Kaur
    Abstract:

    This paper tests for downward nominal Wage Rigidity in markets for casual daily agricultural labor in a developing country context. I examine Wage and employment responses to rainfall shocks—which shift labor demand—in 500 Indian districts from 1956-2008. First, there is asymmetric Wage adjustment: nominal Wages rise in response to positive shocks but do not fall during droughts. Second, after transitory positive shocks have dissipated, nominal Wages do not return to previous levels—they remain high in future years. Third, inflation moderates these eects: when inflation is higher, real Wages are more likely to fall during droughts and after transitory positive shocks. Fourth, Wage distortions generate employment distortions, creating boom and bust cycles: employment is lower in the year after a transitory positive shock than if the positive shock had not occurred; landless laborers experience a 6% employment reduction. Fifth, consistent with the misallocation of labor across farms, households with smaller landholdings increase labor supply to their own farms when they are rationed out of the external labor market. These findings indicate that Wage Rigidity lowers employment levels and increases employment volatility—in a setting with few institutional constraints. Data from a new survey I conducted in two Indian states suggests that agricultural workers and employers: view nominal Wage cuts as unfair; are considerably less likely to regard real Wage cuts as unfair if they are achieved through inflation; and believe that nominal Wage cuts cause eort reductions.

  • nominal Wage Rigidity in village labor markets
    The American Economic Review, 2019
    Co-Authors: Supreet Kaur
    Abstract:

    This paper tests for downward nominal Wage Rigidity by examining transitory shifts in labor demand, generated by rainfall shocks, in 600 Indian districts from 1956-2009. Nominal Wages rise in response to positive shocks but do not fall during droughts. In addition, transitory positive shocks generate ratcheting: after they have dissipated, nominal Wages do not adjust back down. This ratcheting effect generates a 9% reduction in employment levels. Inflation enables downward real Wage adjustments both during droughts and after positive shocks. Survey evidence suggests that workers and employers believe that nominal Wage cuts are unfair and lead to effort reductions.

George S. Tavlas - One of the best experts on this subject based on the ideXlab platform.

  • Wage Rigidity and monetary union
    The Economic Journal, 2005
    Co-Authors: Harris Dellas, George S. Tavlas
    Abstract:

    We compare monetary union to flexible exchange rates in an asymmetric, threecountry model with active monetary policy. Unlike the traditional OCA literature, we find that countries with a high degree of nominal Wage Rigidity benefit from monetary union, specially when they join other, similarly rigid countries. Countries with relatively more flexible Wages tend to be worse off in unions with countries that have more rigid Wages. We examine France, Germany and the UK and find that the welfare implications of alternative monetary arrangements depend more on the degree of Wage asymmetry than on other types of asymmetries (in shocks, monetary policy etc.). And that, higher degree of Wage flexibility in the UK relative to France and Germany would make its participation in EMU costly.

  • Wage Rigidity and Monetary Union
    2003
    Co-Authors: Harris Dellas, George S. Tavlas
    Abstract:

    We compare monetary union to flexible exchange rates in an asymmetric, three-country model with active monetary policy. Unlike Friedman's (1953) case for flexible rates, we find that countries with high degree of nominal Wage Rigidity are better off in a monetary union. Their benefits increase with the size of the union and the degree of Wage Rigidity of its members. Those with relatively more flexible Wages fare better under a flexible rate regime. Their cost of participation in a monetary union increases with the union's level of Wage Rigidity as well as its tolerance of inflation variability. Taking into account actual asymmetries in the EU we find that the status quo (France and Germany in EMU, the UK pursuing a flexible rate) represents the best monetary arrangement for each of these countries. All three would likely be worse off if the UK joined EMU.

Harris Dellas - One of the best experts on this subject based on the ideXlab platform.

  • Wage Rigidity and monetary union
    The Economic Journal, 2005
    Co-Authors: Harris Dellas, George S. Tavlas
    Abstract:

    We compare monetary union to flexible exchange rates in an asymmetric, threecountry model with active monetary policy. Unlike the traditional OCA literature, we find that countries with a high degree of nominal Wage Rigidity benefit from monetary union, specially when they join other, similarly rigid countries. Countries with relatively more flexible Wages tend to be worse off in unions with countries that have more rigid Wages. We examine France, Germany and the UK and find that the welfare implications of alternative monetary arrangements depend more on the degree of Wage asymmetry than on other types of asymmetries (in shocks, monetary policy etc.). And that, higher degree of Wage flexibility in the UK relative to France and Germany would make its participation in EMU costly.

  • Wage Rigidity and Monetary Union
    2003
    Co-Authors: Harris Dellas, George S. Tavlas
    Abstract:

    We compare monetary union to flexible exchange rates in an asymmetric, three-country model with active monetary policy. Unlike Friedman's (1953) case for flexible rates, we find that countries with high degree of nominal Wage Rigidity are better off in a monetary union. Their benefits increase with the size of the union and the degree of Wage Rigidity of its members. Those with relatively more flexible Wages fare better under a flexible rate regime. Their cost of participation in a monetary union increases with the union's level of Wage Rigidity as well as its tolerance of inflation variability. Taking into account actual asymmetries in the EU we find that the status quo (France and Germany in EMU, the UK pursuing a flexible rate) represents the best monetary arrangement for each of these countries. All three would likely be worse off if the UK joined EMU.

Ladislav Wintr - One of the best experts on this subject based on the ideXlab platform.

  • downward Wage Rigidity and automatic Wage indexation evidence from monthly micro Wage data
    2010
    Co-Authors: Patrick Lunnemann, Ladislav Wintr
    Abstract:

    This paper assesses the degree of downward Wage Rigidity in Luxembourg using an administrative monthly data set on individual Wages covering the entire economy over the period from January 2001 to January 2007. After limiting for measurement error, which would otherwise bias downwards the estimates of Wage Rigidity, we conclude that nearly all workers in Luxembourg are potentially subject to downward real Wage Rigidity. Our results are robust to different procedures to adjust for measurement error and methods for estimation of downward Wage Rigidity. We report relatively small differences in the frequency of nominal Wage cuts across occupational groups and sectors. In addition, the observed Rigidity does not seem to be driven predominantly by the absence of negative shocks. We show that the real Wage Rigidity is related to the automatic Wage indexation, while additional factors might be necessary to explain the high degree of downward Wage Rigidity.

  • downward Wage Rigidity and automatic Wage indexation evidence from monthly micro Wage data
    2010
    Co-Authors: Patrick Lunnemann, Ladislav Wintr
    Abstract:

    This paper assesses the degree of downward Wage Rigidity in Luxembourg using an administrative monthly data set on individual Wages covering the entire economy over the period from January 2001 to January 2007. After limiting for measurement error, which would otherwise bias downwards the estimates of Wage Rigidity, we conclude that nearly all workers in Luxembourg are potentially subject to downward real Wage Rigidity. Our results are robust to different procedures to adjust for measurement error and methods for estimation of downward Wage Rigidity. We report relatively small differences in the frequency of nominal Wage cuts across occupational groups and sectors. In addition, the observed Rigidity does not seem to be driven predominantly by the absence of negative shocks. We show that the downward real Wage Rigidity is related to automatic Wage indexation, while additional factors might be necessary to explain the high degree of downward nominal Wage Rigidity.

  • understanding sectoral differences in downward real Wage Rigidity workforce composition institutions technology and competition
    2009
    Co-Authors: Philip Du Caju, Catherine Fuss, Ladislav Wintr
    Abstract:

    This paper examines whether differences in Wage Rigidity across sectors can be explained by differences in workforce composition, competition, technology and Wage-bargaining institutions. We adopt the measure of downward real Wage Rigidity (DRWR) developed by Dickens and Goette (2006) and rely on a large administrative matched employer-employee dataset for Belgium over the period 1990-2002. Firstly, our results indicate that DRWR is significantly higher for white-collar workers and lower for older workers and for workers with higher earnings and bonuses. Secondly, beyond labour force composition effects, sectoral differences in DRWR are related to competition, firm size, technology and Wage-bargaining institutions. We find that Wages are more rigid in more competitive sectors, in labour-intensive sectors, and in sectors with predominant centralised Wagesetting at the sector level as opposed to firm-level Wage agreements.

  • downward Wage Rigidity for different workers and firms an evaluation for belgium using the iwfp procedure
    2007
    Co-Authors: Philip Du Caju, Catherine Fuss, Ladislav Wintr
    Abstract:

    This paper evaluates the extent of downward nominal and real Wage Rigidity for different categories of workers and firms using the methodology recently developed by the International Wage Flexibility Project (Dickens and Goette, 2006). The analysis is based on an administrative data set on individual earnings, covering one-third of employees of the private sector in Belgium over the period 1990-2002. Our results show that Belgium is characterised by strong real Wage Rigidity and very low nominal Wage Rigidity, consistent with the Belgian Wage formation system of full indexation. Real Rigidity is stronger for white-collar workers than for blue-collar workers. Real Rigidity decreases with age and Wage level. Wage Rigidity appears to be lower in firms experiencing downturns. Finally, smaller firms and firms with lower job quit rates appear to have more rigid Wages. Our results are robust to alternative measures of Rigidity. JEL Classification: J31

  • downward Wage Rigidity for different workers and firms an evaluation for belgium using the iwfp procedure
    2007
    Co-Authors: Philip Du Caju, Catherine Fuss, Ladislav Wintr
    Abstract:

    This paper evaluates the extent of downward nominal and real Wage Rigidity for different categories of workers and firms using the methodology recently developed by the International Wage Flexibility Project (Dickens and Goette, 2006). The analysis is based on an administrative data set on individual earnings, covering one-third of employees of the private sector in Belgium over the period 1990-2002. Our results show that Belgium is characterised by strong real Wage Rigidity and very low nominal Wage Rigidity, consistent with the Belgian Wage formation system of full indexation. Real Rigidity is stronger for white-collar workers than for blue-collar workers. Real Rigidity decreases with age and Wage level. Wage Rigidity appears to be lower in firms experiencing downturns. Finally, smaller firms and firms with lower job quit rates appear to have more rigid Wages. Our results are robust to alternative measures of Rigidity.

Steinar Holden - One of the best experts on this subject based on the ideXlab platform.

  • Wage Rigidity inflation and institutions
    The Scandinavian Journal of Economics, 2014
    Co-Authors: Steinar Holden, Fredrik Wulfsberg
    Abstract:

    We study the possible existence of downward nominal Wage Rigidity (DNWR) at Wage growth rates different from zero in aggregate data. Even if DNWR prevails at zero for individual workers, compositional effects might lead to falling aggregate Wages, while changes in relative Wages combined with DNWR might lead to positive aggregate Wage growth. We explore industry data for 19 OECD countries, over the 1971–2006 period. We find evidence for a floor on nominal Wage growth at 6 percent in the 1970s and 1980s, at 1 percent in the 1990s, and at 0.5 percent in the 2000s. Furthermore, we find that DNWR is stronger in country-years with strict employment protection legislation, high union density, centralized Wage setting, and high inflation.

  • how strong is the macroeconomic case for downward real Wage Rigidity
    Journal of Monetary Economics, 2009
    Co-Authors: Steinar Holden, Fredrik Wulfsberg
    Abstract:

    We explore the existence of downward real Wage Rigidity (DRWR) at the industry level, based on data from 19 OECD countries for the period 1973–1999. The results show that DRWR compresses the distributions of industry Wage changes overall, as well as for specific geographical regions and time periods, but there are not many real Wage cuts that are prevented. More important, however, DRWR attenuates larger real Wage cuts, thus leading to higher real Wages. There is stronger evidence for downward nominal Wage Rigidity than for DRWR. Real Wage cuts are less prevalent in countries with strict employment protection legislation and high union density.

  • Wage Rigidity institutions and inflation
    39, 2009
    Co-Authors: Steinar Holden, Fredrik Wulfsberg
    Abstract:

    A number of recent studies have documented extensive downward nominal Wage Rigidity (dnwr) for job stayers in many oecd countries. However, dnwr for individual workers may induce downward Rigidity or “a floor” for the aggregate Wage growth at positive or negative levels. Aggregate Wage growth may be below zero because of compositional eects, for example that old, high-Wage workers are replaced by young low-Wage workers. dnwr may also lead to a positive growth in aggregate Wages because of changes in relative Wages. We explore industry data for 19 oecd countries, over the period 1971‐2006. We find evidence for floors on nominal Wage growth at 6 percent and lower in the 1970s and 1980s, at one percent in the 1990s, and at 0.5 percent in the 2000s. Furthermore, we find that dnwr is stronger in country-years with strict employment protection legislation, high union density, centralised Wage setting and high inflation.

  • downward nominal Wage Rigidity in the oecd
    B E Journal of Macroeconomics, 2008
    Co-Authors: Steinar Holden, Fredrik Wulfsberg
    Abstract:

    This paper explores the existence of downward nominal Wage Rigidity (DNWR) in 19 OECD countries, over the period 1973‐1999, using data for 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 11 percent in the late 1990s, but the number of industries a ected by DNWR has increased. DNWR is more prevalent when inflation is high, unemployment is low, union density is high and employment protection legislation is strict.

  • downward nominal Wage Rigidity in the oecd
    2007
    Co-Authors: Steinar Holden, Fredrik Wulfsberg
    Abstract:

    Recent micro studies have documented extensive downward nominal Wage Rigidity (DNWR) for job stayers in many OECD countries, but the effect on aggregate variables remains disputed. Using data for hourly nominal Wages, we explore the existence of DNWR on Wages at the industry level in 19 OECD countries, over the period 1973-1999. Based on a novel method, we reject the hypothesis of no DNWR. 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, union density is high, and employment protection legislation is strict.