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Ehrlich, Gabriel & Joshua Montes (2024): Wage Rigidity and Employment Outcomes: Evidence from Administrative Data. In: American Economic Journal. Macroeconomics, Jg. 16, H. 1, S. 147-206. DOI:10.1257/mac.20200125

Abstract

"This paper examines the relationship between downward nominal wage rigidity and employment outcomes using linked employer-employee data. Wage rigidity prevents 27.1 percent of counterfactual wage cuts, with a standard deviation of 19.2 percent across establishments. An establishment with the sample-average level of wage rigidity is predicted to have a 3.3 percentage point higher layoff rate, a 7.4 percentage point lower quit rate, and a 2.0 percentage point lower hire rate. Estimating a structural model by indirect inference implies that the cost of a nominal wage cut is 33 percent of an average worker’s annual compensation. (JEL E24, J23, J31, J63, M51)" (Author's abstract, IAB-Doku) ((en))

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Minni, Virginia (2024): Global managers, local workers: Wage setting inside a multinational firm. (CEP discussion paper / Centre for Economic Performance 1975), London, 18 S.

Abstract

"How are wages set within a multinational firm? Combining cross-country data on wages and labor regulations with personnel records of a large multinational firm, I find that wage setting depends on the rank of the employee in the firm hierarchy. For managers, wages are set by the headquarters regardless of local labor market conditions. For factory workers, wages are adjusted according to country-specific wages and labor regulations. These results suggest that the multinational’s internal labor market shields managers against changes in external market conditions, while the firm adapts to local labor markets for factory workers." (Author's abstract, IAB-Doku) ((en))

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Snell, Andy, Heiko Stüber & Jonathan P. Thomas (2024): Job security, asymmetric information, and wage rigidity. In: European Economic Review, Jg. 161, 2023-10-23. DOI:10.1016/j.euroecorev.2023.104622

Abstract

"We consider a labor market with risk averse workers, directed search and asymmetric information in which firms can commit to wage contracts but not to retain workers. The model predicts that in downturns (i) there is equal treatment of incumbents and new hires, (ii) wages are insensitive to the severity of the downturn, (iii) this leads to an amplified employment effect, and (iv) wages are determined by forecasts of labor market conditions rather than actual values. By contrast in upswings, new-hire wages are more attuned to actual conditions than forecasts, whilst incumbent wages remain relatively rigid. We find that these novel predictions are well supported in German administrative data." (Author's abstract, IAB-Doku, © Elsevier) ((en))

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Andersen, Soren Kaj, Chris F. Wright & Russell D. Lansbury (2023): Defining the problem of low wage growth in Australia and Denmark: From the actors' perspectives. In: European journal of industrial relations, Jg. 29, H. 2, S. 177-194. DOI:10.1177/09596801221132424

Abstract

"Low wage growth is a challenge common to many OECD countries including countries with very different institutional systems. This paper utilises and extends Rochefort and Cobb’s (1993) ‘problem definition’ framework to analyse how employer and union representatives in Australia and Denmark explain the causes of low wage growth. Drawing on elite interviews, which allow us to assess the nuance of actors’ perceptions, we find disagreement among Australian actors about the role of the collective bargaining system in contributing to low wage growth. Despite disagreement over the extent of the low wage growth problem in Denmark, both unions and employers expressed confidence in the ability of the bargaining system to resolve it. We argue that the greater degree of consensus in Denmark compared with Australia reflects differences in national institutional systems and knowledge regimes, which have influenced the ways actors in these countries perceive low wage growth." (Author's abstract, IAB-Doku) ((en))

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Arabzadeh, Hamzeh, Almut Balleer, Britta Gehrke & Ahmet Ali Taskin (2023): Minimum Wages, Wage Dispersion and Financial Constraints in Firms. (IZA discussion paper / Forschungsinstitut zur Zukunft der Arbeit 16455), Bonn, 56 S.

Abstract

"This paper studies how minimum wages affect the wage distribution if firms face financial constraints. Using German employer-employee data and firm balance sheets, we document that the within-firm wage dispersion decreases more with higher minimum wages when firms are financially constrained. We introduce financial frictions into a search and matching labor market model with stochastic job matching, imperfect information, and endogenous effort. In line with the empirical literature, the model predicts that a higher minimum wage reduces hirings and separations. Firms become more selective such that their employment and wage dispersion fall. If effort increases strongly, firms may increase employment at the expense of higher wage dispersion. Financially constrained firms are more selective and reward effort less. As a result, within-firm wage dispersion and employment in these firms fall more with the minimum wage." (Author's abstract, IAB-Doku) ((en))

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Bellmann, Lutz, Christian Dustmann, Martin Biewen, Bernardo Fanfani, Michael Oberfichtner, Bernd Fitzenberger, Sydnee Caldwell, Kerstin Ostermann, Alexandra Spitz-Oener & Steffen Müller; Christian Dustmann, Martin Biewen, Bernardo Fanfani, Michael Oberfichtner, Bernd Fitzenberger, Sydnee Caldwell, Kerstin Ostermann, Alexandra Spitz-Oener & Steffen Müller (sonst. bet. Pers.) (2023): Recent Developments in the Distribution of Labour Income and Skills. In: IAB-Forum H. 15.12.2023 Nürnberg. DOI:10.48720/IAB.FOO.20231215.02

Abstract

"Contributing to a better understanding of wage determination and wage distribution as well as job skills – that was the aim of the international conference “Recent Developments in Wage Determination, Distribution, and Job Skills” at the IAB." (Author's abstract, IAB-Doku) ((en))

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Bellmann, Lutz, Christian Dustmann, Martin Biewen, Bernardo Fanfani, Michael Oberfichtner, Bernd Fitzenberger, Sydnee Caldwell, Kerstin Ostermann, Alexandra Spitz-Oener & Steffen Müller; Christian Dustmann, Martin Biewen, Bernardo Fanfani, Michael Oberfichtner, Bernd Fitzenberger, Sydnee Caldwell, Kerstin Ostermann, Alexandra Spitz-Oener & Steffen Müller (sonst. bet. Pers.) (2023): Aktuelle Entwicklungen bei der Verteilung der Arbeitseinkommen und Kompetenzen (Podium). In: IAB-Forum H. 30.10.2023 Nürnberg. DOI:10.48720/IAB.FOO.20231030.01

Abstract

"Zu einem besseren Verständnis der Lohnfindung und Lohnverteilung sowie der beruflichen Qualifikationen beizutragen – das war das Ziel der internationalen Konferenz „Recent Developments in Wage Determination, Distribution, and Job Skills“ am IAB." (Autorenreferat, IAB-Doku)

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Blien, Uwe, Jan Mutl, Van Phan thi Hong & Katja Wolf (2023): Wage reactions to regional and national unemployment. In: Regional Science Policy & Practice, Jg. online first accepted manuscript, S. 1-11., 2023-05-02. DOI:10.1111/rsp3.12675

Abstract

"This paper analyses the entire wage effects of unemployment for an especially long observation period. In a three-step approach, the wage reaction at national level (wage setting curve or aggregate wage equation) is added to the reaction at regional level (wage curve). Spatial models with instrumental variables are used." (Author's abstract, IAB-Doku, © Wiley) ((en))

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Borjas, George J. (2023): Labor economics. New York: MacGraw-Hill, 494 S.

Abstract

"Labor Economics, ninth edition by George J. Borjas provides a modern introduction to labor economics, surveying the field with an emphasis on both theory and facts. Labor Economics is thoroughly integrated with the adaptive digital tools available in McGraw-Hill’s Connect, proven to increase student engagement and success in the course. All new Data Explorer questions using data simulation to help students grasp concepts Materials are fresh and up to date by introducing and discussing the latest research studies where conceptual or empirical contributions have increased our understanding of the labor market. The book has undergone Diversity, Equity, and Inclusion reviews to implement content around topics including generalizations and stereotypes, gender, abilities/disabilities, race/ethnicity, sexual orientation, diversity of names, and age." (Author's abstract, IAB-Doku) ((en))

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Broer, Tobias, Karl Harmenberg, Per Krusell & Erik Öberg (2023): Macroeconomic Dynamics with Rigid Wage Contracts. In: The American economic review. Insights, Jg. 5, H. 1, S. 55-72. DOI:10.1257/aeri.20210672

Abstract

"We adapt the wage contracting structure in Chari (1983) to a dynamic, balanced-growth setting with recontracting as in Calvo (1983). The resulting wage-rigidity framework dampens income effects in the short run, thus allowing significant responses of hours to aggregate shocks. In reduced form, the model dynamics are similar to that in Jaimovich and Rebelo (2009), with their habit parameter replaced by our probability of wage-contract resetting. That is, if wage contracts are reset frequently, labor supply behaves in accordance with King, Plosser, and Rebelo (1988) preferences, whereas if they are never reset, we obtain the setting in Greenwood, Hercowitz, and Huffman (1988)." (Author's abstract, IAB-Doku) ((en))

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Cairó, Isabel, Hess T. Chung, Francesco Ferrante, Cristina Fuentes-Albero, Camilo Morales-Jimenez & Damjan Pfajfar (2023): Endogenous Labor Supply in an Estimated New-Keynesian Model: Nominal versus Real Rigidities. (Finance and economics discussion series / Federal Reserve Board, Washington 2023-069), Washington, DC, 57 S.

Abstract

"The deep deterioration in the labor market during the Great Recession, the subsequent slow recovery, and the missing disinflation are hard to reconcile for standard macroeconomic models. We develop and estimate a New-Keynesian model with financial frictions, search and matching frictions in the labor market, and endogenous intensive and extensive labor supply decisions. We conclude that the estimated combination of the low degree of nominal wage rigidities and high degree of real wage rigidities, together with the small role of pre-match costs relative to post-match costs, are key in successfully forecasting the slow recovery in unemployment and the missing disinflation in the aftermath of the Great Recession. We find that endogenous labor supply data are very informative about the relative degree of nominal and real wage rigidities and the slope of the Phillips curve. We also find that none of the model-based labor market gaps are a sufficient statistic of labor market slack, but all contain relevant information about the state of the economy summarized in a new indicator for labor market slack we put forward." (Author's abstract, IAB-Doku) ((en))

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Davis, Steven J. & Pawel M. Krolikowski (2023): Sticky Wages on the Layoff Margin. (IZA discussion paper / Forschungsinstitut zur Zukunft der Arbeit 16351), Bonn, 57 S.

Abstract

"We design and field an innovative survey of unemployment insurance (UI) recipients that yields new insights about wage stickiness on the layoff margin. Most UI recipients express a willingness to accept wage cuts of 5-10 percent to save their jobs, and one third would accept a 25 percent cut. Yet worker-employer discussions about cuts in pay, benefits or hours in lieu of layoffs are exceedingly rare. When asked why employers don't propose job-saving pay cuts, four-in-ten UI recipients don't know. Sixteen percent say cuts would undermine morale or lead the best workers to quit, and 39 percent don't think wage cuts would save their jobs. For lost union jobs, 45 percent say contractual restrictions prevent wage cuts. Among those on permanent layoff who reject our hypothetical pay cuts, half say they have better outside options, and 38 percent regard the proposed pay cut as insulting. An estimated one-quarter of the layoffs violate the condition for bilaterally efficient separations that holds in leading theories of job separations, frictional unemployment, and job ladders. We draw on our findings and other evidence to assess theories of wage stickiness and its role in layoffs." (Author's abstract, IAB-Doku) ((en))

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Elsby, Michael, Axel Gottfries, Pawel Krolikowski & Gary Solon (2023): Wage Adjustment in Efficient Long-Term Employment Relationships. (Working paper / Federal Reserve Bank of Cleveland 23-23), Cleveland, OH, 45 S. DOI:10.26509/frbc-wp-202323

Abstract

"We present a model in which efficient long-term employment relationships are sustained by wage adjustments prompted by shocks to idiosyncratic productivity and the arrival of outside job offers. In accordance with casual and formal evidence, these wage adjustments occur only sporadically, due to the presence of renegotiation costs. The model is amenable to analytical solution and yields new insights into a number of labor market phenomena, including: (1) key features of the empirical distributions of changes in pay among job stayers; (2) a property of near-“memorylessness” in wage dynamics that implies that initial hiring wages have only limited influence on later wages and allocation decisions; and (3) a crucial role for nonbase pay—specifically, recruitment and retention bonuses—in sustaining efficient employment relationships." (Author's abstract, IAB-Doku) ((en))

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Gaur, Meghana, John Grigsby, Jonathon Hazell & Abdoulaye Ndiaye (2023): Bonus Question: Does Flexible Incentive Pay Dampen Unemployment Dynamics? (IZA discussion paper / Forschungsinstitut zur Zukunft der Arbeit 16481), Bonn, 86 S.

Abstract

"We introduce dynamic incentive contracts into a model of unemployment dynamics and present three results. First, wage cyclicality from incentives does not dampen unemployment dynamics: the response of unemployment to shocks is first-order equivalent in an economy with flexible incentive pay and without bargaining, vis-a-vis an economy with rigid wages. Second, wage cyclicality from bargaining dampens unemployment dynamics through the standard mechanism. Third, our calibrated model suggests 46% of wage cyclicality in the data arises from incentives. A standard model without incentives calibrated to weakly procyclical wages, matches unemployment dynamics in our incentive pay model calibrated to strongly procyclical wages." (Author's abstract, IAB-Doku) ((en))

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Hazell, Jonathon & Bledi Taska (2023): Downward Rigidity in the Wage for New Hires. (IZA discussion paper / Forschungsinstitut zur Zukunft der Arbeit 16512), Bonn, 79 S.

Abstract

"Wage rigidity is an important explanation for unemployment fluctuations. In benchmark models wages for new hires are key, but there is limited evidence on this margin. We use wages posted on vacancies, with job and establishment information, to measure the wage for new hires. We show that our measure of the wage for new hires is rigid downward and flexible upward, in two steps. First, wages change infrequently at the job level, and fall especially rarely. Second, wages do not respond to rises in unemployment, but respond strongly to falls in unemployment. Job information is crucial for detecting downward rigidity." (Author's abstract, IAB-Doku) ((en))

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Lesch, Hagen & Lennart Eckle (2023): Lohnentwicklung und Lohnstauchung im Öffentlichen Dienst. (IW-Kurzberichte / Institut der Deutschen Wirtschaft Köln 2023,88), Köln, 3 S.

Abstract

"Nachdem im April 2023 bereits ein Tarifergebnis für die Beschäftigten des öffentlichen Dienstes des Bundes und der Kommunen erreicht wurde, finden aktuell Tarifverhandlungen für die Beschäftigten der Länder statt. Die Gewerkschaften fordern 10,5 Prozent mehr Lohn, mindestens aber 500 Euro. Setzen sie dies durch, würde die ohnehin schon stark komprimierte Lohnstruktur weiter gestaucht." (Autorenreferat, IAB-Doku)

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Massenkoff, Maxim & Nathan Wilmers (2023): Wage Stagnation and the Decline of Standardized Pay Rates, 1974-1991. In: American Economic Journal. Applied Economics, Jg. 15, H. 1, S. 474-507. DOI:10.1257/app.20200819

Abstract

"Using new establishment-by-occupation microdata, we show that the use of discretionary wage setting significantly expanded in the 1970s and 1980s. Increasingly, wages for blue-collar workers were not standardized by job title or seniority but instead subject to managerial discretion. When establishments abandoned standardized pay rates, wages fell, particularly for the lowest-paid workers in a job and for those in establishments that previously paid above market rates. This shift away from standardized pay rates, in context of a broader decline in worker bargaining power, accelerated the decline in real wages experienced by blue-collar workers in the 1980s." (Author's abstract, IAB-Doku) ((en))

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Moramarco, Domenico (2023): Fairness and Gini decomposition. In: Economics Letters, Jg. 233. DOI:10.1016/j.econlet.2023.111409

Abstract

"We propose a new decomposition of the Gini coefficient that nests a structuralist and an individualistic definition of unfair inequality, as well as ex ante and ex post measures of inequality of opportunity. We illustrate the decomposition on Belgian data, highlighting the source of a consistent difference between these views about unfair inequality." (Author's abstract, IAB-Doku, © 2024 Elsevier) ((en))

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Ngai, L. Rachel & Orhun Sevinc (2023): A Multisector Perspective on Wage Stagnation. (IZA discussion paper / Forschungsinstitut zur Zukunft der Arbeit 16356), Bonn, 36 S.

Abstract

"Low-skilled workers are concentrated in sectors that experience fast productivity growth and yet their real wages have been stagnating. We document evidence from the U.S. to show the importance of sectoral reallocations. Key to our two-sector model is the fall in the relative price of the low-skill intensive sector caused by faster productivity growth. When outputs are complements across sectors, this leads to a reallocation of low-skilled workers to the high-skill intensive sector where their marginal product is stagnant. We show that this mechanism is quantitatively important for the stagnation of low-skill real wages and their divergence from aggregate labor productivity during 1980-2010." (Author's abstract, IAB-Doku) ((en))

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Rudanko, Leena (2023): Firm Wages in a Frictional Labor Market. In: American Economic Journal. Macroeconomics, Jg. 15, H. 1, S. 517-550. DOI:10.1257/mac.20200440

Abstract

"This paper studies wage setting in a directed search model of multiworker firms facing within-firm equity constraints on wages. The constraints reduce wages, as firms exploit their monopsony power over their existing workers, rendering wages less responsive to productivity in doing so. They also give rise to a time inconsistency in the dynamic firm problem, as firms face a less elastic labor supply in the short run than in the long run, making commitment to future wages valuable. Constrained firms find it profitable to fix wages, and doing so is good for worker welfare and resource allocation in equilibrium." (Author's abstract, IAB-Doku) ((en))

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Bils, Mark, Yongsung Chang & Sun-Bin Kim (2022): How Sticky Wages in Existing Jobs Can Affect Hiring. In: American Economic Journal. Macroeconomics, Jg. 14, H. 1, S. 1-37. DOI:10.1257/mac.20190338

Abstract

"We consider a matching model of employment with flexible wages for new hires but sticky wages within matches. Unlike most models of sticky wages, we allow effort to respond if wages are too high or too low. In the Mortensen-Pissarides model, employment is not affected by wage stickiness in existing matches. But it is in our model. If wages of matched workers are stuck too high, firms require more effort, lowering the value of additional labor and reducing hiring. We find that effort's response can greatly increase wage inertia." (Author's abstract, IAB-Doku) ((en))

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Caporale, Guglielmo Maria & Luis A. Gil-Alana (2022): Nominal and Real Wages in the UK, 1750 - 2015. Mean Reversion, Persistence and Structural Breaks. (CESifo working paper 10018), München, 14 S.

Abstract

"This paper analyses the stochastic properties of UK nominal and real wages over the period 1750-2015 using fractional integration techniques. Both the original series and logged ones are analysed. The results generally suggest that nominal wages exhibit a higher degree of persistence, which reflects relatively long lags between inflation and wage adjustments. Endogenous break tests are also carried out and various structural breaks are identified in both series. On the whole the corresponding subsample estimates imply an increase over time in the degree of persistence of both series." (Author's abstract, IAB-Doku) ((en))

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Card, David (2022): Who Set Your Wage? In: The American economic review, Jg. 112, H. 4, S. 1075-1090. DOI:10.1257/aer.112.4.1075

Abstract

"I discuss the recent literature that has led to new interest in the idea of monopsonistic wage setting. Building on advances in search theory and in models of differentiated products, researchers have used a number of different strategies to identify the elasticity of firm-specific labor supply. A growing consensus is that firms have some wage-setting power, though many questions remain about the sources of that power." (Author's abstract, IAB-Doku) ((en))

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Carlsson, Mikael & Andreas Westermark (2022): Endogenous Separations, Wage Rigidities, and Unemployment Volatility. In: American Economic Journal. Macroeconomics, Jg. 14, H. 1, S. 332-354. DOI:10.1257/mac.20180314

Abstract

"We show that in microdata, as well as in a search and matching model with flexible wages for new hires, wage rigidities of incumbent workers have substantial effects on separations and unemployment volatility. Allowing for an empirically relevant degree of wage rigidities for incumbent workers drives unemployment volatility as well as the volatility of vacancies and tightness to that in the data. Thus, the degree of wage rigidity for newly hired workers is not a sufficient statistic for determining the effect of wage rigidities on macroeconomic outcomes. This finding affects the interpretation of a large empirical literature on wage rigidities." (Author's abstract, IAB-Doku) ((en))

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Funk, Anne Kathrin & Daniel Kaufmann (2022): Do Sticky Wages Matter? New Evidence from Matched Firm Survey and Register Data. In: Economica, Jg. 89, H. 355, S. 689-712. DOI:10.1111/ecca.12412

Abstract

"We study the causal effects of downward nominal wage rigidity after a deflationary monetary policy shock using Swiss data on employee-level contractual wages matched with income and employment from social security register data. We exploit the discontinuity around the origin of the wage growth distribution to compare the outcomes of individuals with wage freezes (treatment group) and small wage cuts (control group) before and after an unexpected decision by the Swiss National Bank leading to a 1% decline of the price level. Locally (that is, near the origin of the wage growth distribution), downward nominal wage rigidities cause a 4.4% decline in income and a 0.7 percentage point increase in the probability of unemployment. In the aggregate, income declines by 0.3% and the probability of unemployment increases by 0.05 percentage points." (Author's abstract, IAB-Doku, Published by arrangement with John Wiley & Sons) ((en))

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Funk, Anne Kathrin & Daniel Kaufmann (2022): Do Bonuses Offset the Allocative Effects of Downward Rigid Base Wages? In: AEA papers and proceedings, Jg. 112, S. 486-490. DOI:10.1257/pandp.20221097

Abstract

"We measure the labor market outcomes of employees with downward rigid base wages after an unexpected deflationary shock in Switzerland using a firm survey matched with Social Security register data. The employees that additionally receive downward flexible compensation, such as bonuses, are less likely to lose their job after a deflationary shock than those only receiving a base wage. Only a modest share of employees receives downward flexible compensation, however. Therefore, these compensation schemes do not offset the overall allocative effects of downward rigid base wages." (Author's abstract, IAB-Doku) ((en))

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Jo, Yoon J. & Sarah Zubairy (2022): State Dependent Government Spending Multipliers: Downward Nominal Wage Rigidity and Sources of Business Cycle Fluctuations. (NBER working paper 30025), Cambridge, Mass, 69 S. DOI:10.3386/w30025

Abstract

"We consider a New Keynesian model with downward nominal wage rigidity (DNWR) and show that government spending is much more effective in stimulating output in a low-inflation recession relative to a high-inflation recession. The government spending multiplier is large when DNWR binds, but the nature of recession matters due to the opposing response of inflation. In a demand-driven recession, inflation falls, preventing real wages from falling, leading to unemployment, while inflation rises in a supply-driven recession limiting the consequences of DNWR on employment. We document supporting empirical evidence, using both historical time series data and cross-sectional data from U.S. states." (Author's abstract, IAB-Doku) ((en))

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Uemura, Yuki (2022): Job Search Intensity and Wage Rigidity in Business Cycles. (KIER discussion paper series 1078), Kyoto, 34 S.

Abstract

"This paper examines the job search behavior of unemployed workers over the business cycle. The paper first constructs a standard search and matching model with endogenous search efforts, wage rigidity, and a generalized matching function. Contrary to the existing literature, the proposed model generates both procyclical and countercyclical search intensity, depending on the degree of wage rigidity and the elasticity parameter of the matching function. The paper then calibrates the model to the U.S. economy and provides various impulse response analyses. The numerical exercises show that the model successfully and simultaneously reproduces countercyclical search efforts and sizable labor market fluctuations." (Author's abstract, IAB-Doku) ((en))

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Villanueva, Ernesto & Effrosyni Adamopoulou (2022): Employment and wage effects of extending collective bargaining agreements. Sectoral collective contracts reduce inequality but may lead to job losses among workers with earnings close to the wage floors. (IZA world of labor 136), Bonn, 12 S. DOI:10.15185/izawol.136.v2

Abstract

"Der Gesamteffekt der Allgemeinverbindlichkeit von Tarifverträgen hängt davon ab, wie viele Arbeitsplätze aufgrund der tariflich geregelten Lohnuntergrenzen und sonstigen Arbeitsbedingungen abgebaut werden. Um die Auswirkungen auf Löhne und Beschäftigung bewerten zu können, müssen Informationen über Tarifverträge mit Längsschnittdaten zu Arbeitgebern und Arbeitnehmern verknüpft werden. Neue Erkenntnisse der Forschung zeigen, dass negative Effekte meist auf Arbeitnehmer mit Verdiensten in der Nähe der Mindestlöhne beschränkt sind. Öffnungsklauseln und Repräsentativitätserfordernisse können dem entgegenwirken." (Autorenreferat, IAB-Doku)

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Abbritti, Mirko, Agostino Consolo & Sebastian Weber (2021): Endogenous Growth, Downward Wage Rigidities and Optimal Inflation. (IMF working paper 2021,208), Washington, DC, 49 S.

Abstract

"Standard New Keynesian (NK) models feature an optimal inflation target well below two percent, limited welfare losses from business cycle fluctuations and long-term monetary neutrality. We develop a NK framework with labour market frictions, endogenous productivity and downward wage rigidity (DWR) which challenges these results. The model features a non-vertical long-run Phillips curve between inflation and unemployment and a trade-off between price distortions and output hysteresis that change the welfare-maximizing inflation level. For a plausible set of parameters, the optimal inflation target is in excess of two percent, a target value commonly used across central banks. Deviations from the optimal target carry welfare costs multiple times higher than in traditional NK models. The main reason is that endogenous growth and DWR generate asymmetric and hysteresis effects on unemployment and output. Price level targeting or a Taylor-rule responding to the unemployment rate can handle better the asymmetric and hysteresis effects in our model and deliver significant welfare gains. Our results are robust to the inclusion of the effective lower bound on the monetary policy interest rate." (Author's abstract, IAB-Doku) ((en))

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Bassanini, Andrea, Cyprien Batut & Eve Caroli (2021): Labor Market Concentration and Stayers' Wages. Evidence from France. (IZA discussion paper 14912), Bonn, 20 S.

Abstract

"We investigate the impact of labor market concentration on stayers' wages, where stayers are defined as individuals who were already employed in the same firm the year before. Using administrative data for France, we show that the elasticity of stayers' wages to labor market concentration ranges between -0.0185 and -0.0230, depending on the instrument we use, and controlling for labor productivity and local product market concentration. This represents between about two thirds and three fourth of the elasticity we estimate for new hires. Given the strong wage rigidities characterizing the French labor market, this estimate can be considered a lower bound of the effect of labor market concentration on stayers' wages in an international perspective." (Author's abstract, IAB-Doku) ((en))

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Cacciatore, Matteo & Federico Ravenna (2021): Uncertainty, Wages and the Business Cycle. In: The Economic Journal, Jg. 131, H. 639, S. 2797-2823. DOI:10.1093/ej/ueab019

Abstract

"We show that limited wage flexibility in economic downturns generates strong and state-dependent amplification of uncertainty shocks. It also explains the cyclical behaviour of empirical measures of uncertainty. In the presence of matching frictions, an occasionally binding constraint on downward wage adjustment enhances the concavity of firms' hiring rule, resulting in an endogenous profit risk-premium. In turn, higher uncertainty increases the profit risk-premium when the economy operates close to the wage constraint, deepening a recession. Non-linear local projections and vector autoregression estimates support the model predictions. In addition, we show that measured uncertainty rises in a recession even without uncertainty shocks." (Author's abstract, IAB-Doku) ((en))

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Jung, Euiyoung (2021): Rigid Wages, Endogenous Job Destruction, and Destabilizing Spirals. (PSE working paper / Paris School of Economics 2021-27), Paris, 71 S.

Abstract

"This paper studies the theoretical link between real wage rigidity and the destabilizing mechanism driven by the countercyclical precautionary saving demand against unemployment risk. First, I analytically show that destabilizing supply-demand feedback is a general equilibrium outcome of rigid labor cost adjustments. Second, the calibrated wage rigidity consistent with empirical labor market dynamics suggests that real wages are less likely to be sufficiently rigid to cause the destabilizing mechanism. Finally, the way we model job destruction dynamics can have a fundamental impact on the range of real wage rigidity consistent with empirical labor market dynamics and, thus, economic dynamics. Therefore, in contrast to the presumption of many researchers, assuming exogenous job destruction is not innocuous." (Author's abstract, IAB-Doku) ((en))

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Koch, Christian (2021): Can reference points explain wage rigidity? Experimental evidence. In: Journal for labour market research, Jg. 55. DOI:10.1186/s12651-021-00284-2

Abstract

"I examine whether reference points can provide an explanation for rigid wages in recessions. Even though a recession provides a good reason to adjust wages downward, workers’ perception of a “fair wage” may depend on their previous wage, their reference point. Using a laboratory experiment, I test this idea by varying whether initially concluded contracts—and their stipulated wages—can serve as reference points. My experimental results show that with initial contracts workers punish wage cuts even in recessions, leading to considerable more rigid wages. Surprisingly, this is even true without an “objective” justification to feel entitled to initial contracts." (Author's abstract, © 2021 Springer Nature) ((en))

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Köllö, János, István Boza & László Balázsi (2021): Wage gains from foreign ownership: evidence from linked employer-employee data. In: Journal for labour market research, Jg. 55. DOI:10.1186/s12651-021-00286-0

Abstract

"We compare the wages of skilled workers in multinational enterprises (MNEs) versus domestic firms, the earnings of domestic firm workers with past, future and no MNE experience, and estimate how the presence of ex-MNE peers affects the wages of domestic firm employees. The analysis relies on monthly panel data covering half of the Hungarian population and their employers in 2003 - 2011. We identify the returns to MNE experience from changes of ownership, wages paid by new firms of different ownership, and the movement of workers between enterprises. We find high contemporaneous and lagged returns to MNE experience and significant spillover effects. Foreign acquisition has a moderate wage impact, but there is a wide gap between new MNEs and domestic firms. The findings, taken together, suggest that MNE employees accumulate partly transferable knowledge, valued in the high-wage segment of the local economy that is connected with the MNEs via worker turnover." (Author's abstract, © 2021 Springer) ((en))

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Schaefer, Daniel & Carl Singleton (2021): The Extent of Downward Nominal Wage Rigidity: New Evidence from Payroll Data. (Discussion papers / University of Reading, Department of Economics 2021-22), Reading, 57 S.

Abstract

"Low inflation has forced the topic of downward nominal wage rigidity (DNWR) back to the centre stage of macroeconomics. We use over a decade of representative payroll data from Great Britain to document novel facts about wage adjustments. We find that basic wages drive the cyclicality of marginal labour costs, which makes them the most relevant wage measure for macroeconomic models that incorporate wage rigidity. Basic wages show substantially more evidence of downward rigidity than previously documented. Every fifth hourly-paid and every sixth salaried employee normally sees no basic wage change from year-to-year, and very few experience cuts. Wage freezes were more common in the Great Recession and are far more likely in smaller firms. We also find evidence that employers compress wage growth when inflation is low, indicating that DNWR constrains wage setting. Further, we show that the wages of new hires and incumbent employees respond equally to the business cycle. These results all point to the importance of including DNWR in macroeconomic and monetary policy models, and our simulations demonstrate that the empirical extent of DNWR can cause considerable long-run output losses." (Author's abstract, IAB-Doku) ((en))

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Guciardo, Christopher J. (2020): Estimating variances for modeled wage estimates. In: Monthly labor review, Jg. 143, H. March, S. 1-22. DOI:10.21916/mlr.2020.3

Abstract

"The Modeled Wage Estimates (MWE) program publishes mean hourly wages by occupation, geographic area, and worker characteristic (for example, full-time workers). The MWE program combines data from two U.S. Bureau of Labor Statistics programs: the Occupational Employment Statistics (OES) and the National Compensation Survey (NCS). For the first few years of the MWE program, there were no estimates of variance. In 2018, variance estimates were published for the first time for the MWE program, for the May 2017 reference month. This article first shows how the OES and NCS microdata are combined to produce a mean wage estimate. It then focuses on the new variance estimation methodology, highlighting how the variability of both the OES and NCS sample designs are simultaneously captured. A small sample of MWE mean wages and variances are provided for the most recent estimates, for the May 2018 reference month." (Author's abstract, IAB-Doku) ((en))

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Kerndler, Martin & Michael Reiter (2020): Wage Rigidities and Old-Age Unemployment. (EconPol policy brief 22), München, 12 S.

Abstract

"Wage smoothing is beneficial for firms and workers, but wage rigidities can lead to bilaterally inefficient separations. By comparing the impact of four policy measures regarding their impact on welfare, output and government expenditures, Martin Kerndler (TU Wien) and Michael Reiter (IHS Vienna, NYU Abu Dhabi, EconPol Europe) have identified a reasonable policy mix to counter the negative employment effects of wage rigidities." (Author's abstract, IAB-Doku) ((en))

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Lochner, Benjamin & Bastian Schulz (2020): Firm productivity, wages, and sorting. (IAB-Discussion Paper 04/2020), Nürnberg, 76 S.

Abstract

"Wachsende Lohnungleichheit geht mit Veränderungen der Allokation von Arbeitnehmern zu Arbeitgebern im Arbeitsmarkt einher. Dies spiegelt sich auch in einem steigenden Sortierungsgrad des Arbeitsmarkts wider. Wir entwickeln eine neue Methode zur Messung dieses Sortierungsgrades, welche die jeweiligen Beiträge von Arbeitnehmer- und Arbeitgeberheterogenität zur Lohnungleichheit entflechtet. Inspiriert von theoretischen Modellen der Arbeitsmarktsortierung leiten wir die Produktivität der arbeitgebenden Unternehmen aus Schätzungen von Produktionsfunktionen auf der Firmenebene ab. Wir berücksichtigen dabei insbesondere, dass die Firmenproduktivität auf der Matchebene mit der Leistungsfähigkeit der einzelnen Arbeitnehmer interagieren könnte. Anhand deutscher Daten beobachten wir, dass hochproduktive Firmen niedrige Lohnquoten aufweisen, in konzentrierten Märkten operieren und geringere Löhne zahlen als weniger produktive Firmen. Der Sortierungsgrad ist positiv aber niedriger als lohnbasierte Maße nahelegen. Er steigt mit der Zeit, getrieben durch neue Matches zwischen relativ unproduktiven Firmen und weniger leistungsfähigen Arbeitnehmern. An der Spitze geht der Sortierungsgrad zurück, was sich darin widerspiegelt, dass Arbeitnehmer die produktivsten Firmen, die relativ geringe Löhne zahlen, verlassen. Wir diskutieren Implikationen unserer Ergebnisse für die Interpretation steigender Lohnungleichheit." (Autorenreferat, IAB-Doku)

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Aloi, Marta & Andreas Hoefele (2019): Wage stickiness, offshoring and unemployment. In: Economics Letters, Jg. 177, H. April, S. 56-59. DOI:10.1016/j.econlet.2019.01.025

Abstract

"This note investigates how the effect of offshoring on unemployment is influenced by the wage setting process. We assume staggered wage contracts in an otherwise standard search and matching model. In this setup, the contract wage depends also on expected future conditions. We show that more flexibility in the wage contracting process induces greater offshoring, a decrease in the worker's job-finding probability and higher worker's wage within job spells. Notably, less stickiness leads to a fall in the rents that firms can extract by producing domestically." (Author's abstract, © 2019 Elsevier) ((en))

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Boitier, Vincent & Antoine Lepetit (2018): Reduced form wage equations in the credible bargaining model. In: Labour economics, Jg. 50, H. March, S. 92-96. DOI:10.1016/j.labeco.2016.04.003

Abstract

"We derive an explicit solution for the wage from an alternating-offer wage bargaining game à la Hall and Milgrom (2008) under a plausible parameter restriction. This solution is simple, micro-founded and permits a transparent analysis of the driving forces of wages. When it is used in a stationary steady-state search and matching model, the value of all endogenous variables can be expressed as a function of the parameters of the model and the exogenous variables. In a dynamic setup, the solution is much simpler to implement than the one found in the original paper of Hall and Milgrom (2008)." (Author's abstract, © 2016 Elsevier) ((en))

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Carlsson, Mikael & Andreas Westermark (2018): Endogenous separations, wage rigidities and unemployment volatility. (Working papers / Institute for Evaluation of Labour Market and Education Policy 2018,05), Uppsala, 33 S.

Abstract

"We show that in microdata, as well as in a search and matching model with flexible wages for new hires, wage rigidities of incumbent workers have substantial effects on separations and unemployment volatility. Allowing for an empirically relevant degree of wage rigidities for incumbent workers drives unemployment volatility, as well as the volatility of vacancies and tightness to that in the data. Thus, the degree of wage rigidity for newly hired workers is not a sufficient statistic for determining the effect of wage rigidities on macroeconomic outcomes. This finding affects the interpretation of a large empirical literature on wage rigidities." (Author's abstract, IAB-Doku) ((en))

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Snell, Andy, Heiko Stüber & Jonathan Thomas (2018): Downward real wage rigidity and equal treatment wage contracts: theory and evidence. In: Review of Economic Dynamics, Jg. 30, H. October, S. 265-284., 2018-05-24. DOI:10.1016/j.red.2018.06.001

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Snell, Andy, Heiko Stüber & Jonathan P. Thomas (2018): Downward real wage rigidity and equal treatment wage contracts. Theory and evidence. (IZA discussion paper 11504), Bonn, 39 S.

Abstract

"Recent dynamic contracting models of downward real wage rigidity with 'equal treatment' - newly hired workers cannot price themselves into jobs by undercutting incumbents - imply that real wages are relatively rigid in 'bad' times but upwardly flexible during 'good' times. We use an administrative panel dataset to establish that such asymmetries are a feature of West German labor markets. We find that the elasticity of real wages with respect to output is very close to zero in downswings but large and highly significant in upswings. In a separate analysis we find that after controlling for match fixed effects the cyclicality of new hire wages is approximately the same as that for incumbent wages regardless of whether or not they joined the establishment from unemployment This is supportive of equal treatment. We also show that a four parameter version of the equal treatment contracting model of Snell and Thomas (2010) can replicate reasonably well the salient time series properties and co-properties of real wages, output, and unemployment, in particular the asymmetric response of wages to output that we find in the data." (Author's abstract, IAB-Doku) ((en))

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Horn, Gustav A. & Andrew Watt (2017): Wages and nominal and real unit labour cost differentials in EMU. Fellowship initiative "Challenges to Integrated Markets". (European economy. Discussion paper 059), Brüssel, 44 S. DOI:10.2765/303255

Abstract

"This paper addresses the issue of current account imbalances of countries within a monetary union, now widely agreed to have been a major contributor to the persistent economic crisis in the EMU. In particular we focus on the role of wages for current account developments and a possible role for nominal incomes policies in limiting and correcting imbalances.
We set out why national current accounts remain important in a monetary union and examine the forces driving the current account balance. We present empirical evidence on current account developments in the Euro Area, focusing on countries in which a correction has occurred. Detailed counter-factual model-based simulations for Germany show that 'wage policy' on its own is scarcely able to make an impact on its huge and destabilising surplus; what is needed is a combined approach in which nominal wages follow a wage norm (productivity plus ECB target inflation rate) while aggregate demand is managed (in this case stimulated) to fully utilise productive potential.
Against this analytical background we develop a proposal for institutional reform of the Euro Area, building on existing institutions. Key elements are: reinstating the Broad Economic Policy Guidelines as the conceptual framework guiding economic policy, expanding the remit of the Fiscal Council and the Productivity Boards to cover the entire policy mix, and substantially developing the EU Macroeconomic Dialogue in particular by setting up MEDs at Euro Area and Member State levels." (Author's abstract, IAB-Doku) ((en))

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Merkl, Christian & Heiko Stüber (2017): Wage cyclicalities and labor market dynamics at the establishment level. Theory and evidence. (IZA discussion paper 11051), Bonn, 47 S.

Abstract

"Using the new AWFP dataset that covers all German establishments, we document a substantial cross-sectional heterogeneity of establishments' average real wages over the business cycle. While the median establishments' real wages are procyclical, there is a large fraction of establishments with countercyclical real wages. We are the first to show that establishments with more procyclical wages have a less procyclical hires rate and employment behavior. We propose a labor market flow model that is able to replicate these facts and thereby allows us to run counterfactual exercises. When we set the wage cyclicalities of all establishments to the one of the most procyclical establishments, labor market volatilities drop by more than 50 percent." (Author's abstract, IAB-Doku) ((en))

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Stüber, Heiko (2017): The real wage cyclicality of newly hired and incumbent workers in Germany. In: The economic journal, Jg. 127, H. 600, S. 522-546., 2015-05-28. DOI:10.1111/ecoj.12313

Abstract

"Several recent macroeconomic models assume that real wages are rigid. The wage rigidity of newly hired workers assumes a crucial role in these models, as the decision of whether to open a vacancy is primarily influenced by real hiring wages.
This paper analyses the cyclical behaviour of real wages in Germany. It considers recent concerns that not controlling for cyclical job up- and downgrading leads to biased results. The results indicate that wages are not rigid neither for all workers nor for newly hired workers but instead respond considerably to business cycle conditions." (Author's abstract, IAB-Doku) ((en))

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Tse, Michael M. H. & Sholeh A. Maani (2017): The impacts of immigration on earnings and employment. Accounting for effective immigrant work experience. In: Australian Journal of Labour Economics, Jg. 20, H. 1, S. 291-317.

Abstract

"A large segment of New Zealand's population is made up of foreign-born individuals. Despite the significant role that foreign-born individuals play in New Zealand society, little research has been done to address the impact of immigration on the labour market. In this paper we re-examine the impact of immigration in New Zealand using a panel of individual-level New Zealand Income Survey data and the national level methodology. We extend the model to include regional effects, and we incorporate measures of effective immigrant work experience, which reflect the values placed on immigrants' human capital (work experience) in the host country. We find that immigration has little impact on earnings and employment hours. The results further confirm that the effective-experience measure improves the precision of the immigration impact estimates." (Author's abstract, IAB-Doku) ((en))

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Basu, Susanto & Christopher L. House (2016): Allocative and remitted wages. New facts and challenges for Keynesian models. (NBER working paper 22279), Cambrige, Mass., 71 S. DOI:10.3386/w22279

Abstract

"Modern monetary business-cycle models rely heavily on price and wage rigidity. While there is substantial evidence that prices do not adjust frequently, there is much less evidence on whether wage rigidity is an important feature of real world labor markets. While real average hourly earnings are not particularly cyclical, and do not react significantly to monetary policy shocks, systematic changes in the composition of employed workers and implicit contracts within employment arrangements make it difficult to draw strong conclusions about the importance of wage rigidity. We augment a workhorse monetary DSGE model by allowing for endogenous changes in the composition of workers and also by explicitly allowing for a difference between allocative wages and remitted wages. Using both individual-level and aggregate data, we study and extend the available evidence on the cyclicality of wages and we pay particular attention to the response of wages to identified monetary policy shocks. Our analysis suggests several broad conclusions: (i) in the data, composition bias plays a modest but noticeable role in cyclical compensation patterns; (ii) empirically, both the wages for newly hired workers and the 'user cost of labor' respond strongly to identified monetary policy innovations; (iii) a model with implicit contracts between workers and firms and a flexible allocative wage replicates these patterns well. We conclude that price rigidity likely plays a substantially more important role than wage rigidity in governing economic fluctuations." (Author's abstract, IAB-Doku) ((en))

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Elsby, Michael W., Donggyun Shin & Gary Solon (2016): Wage adjustment in the Great Recession. In: Journal of labor economics, Jg. 34, H. 1/Pt. 2, S. S249-S291.

Abstract

"Using 1979 - 2012 CPS data for the United States and 1975 - 2012 NES data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real wages varies across recessions, and does so differently between the two countries, in ways that defy simple explanations. We devote particular attention to the hypothesis that downward nominal wage rigidity plays an important role in cyclical employment and unemployment fluctuations. We conclude that downward wage rigidity may be less binding and have lesser allocative consequences than is often supposed." (Author's abstract, IAB-Doku) ((en))

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Herzog-Stein, Alexander, Camille Logeay, Ulrike Stein & Rudolf Zwiene (2016): Deutsche Arbeitskosten auf Stabilitätskurs. Arbeits- und Lohnstückkostenentwicklung 2015 im europäischen Vergleich. (IMK Report 116), Düsseldorf, 26 S.

Abstract

"Das IMK analysiert regelmäßig mittels Daten von Eurostat die Entwicklung der Arbeits- und der Lohnstückkosten in Europa. Dabei wird die Entwicklung der Arbeitskosten in der Privatwirtschaft, im privaten und im öffentlichen Dienstleistungssektor und im Verarbeitenden Gewerbe in wichtigen europäischen Ländern sowie dem Euroraum und der Europäischen Union als Ganzes dargestellt. In dieser aktuellen Auswertung wird auch der Frage nachgegangen, inwieweit die Einführung des allgemeinen gesetzlichen Mindestlohns im Jahr 2015 in Höhe von 8,50 Euro pro Stunde in Deutschland Einfluss auf den Anstieg der Arbeitskosten insgesamt hatte. Im Anschluss daran wird die Entwicklung der Lohnstückkosten untersucht und den Auswirkungen auf die preisliche Wettbewerbsfähigkeit nachgegangen. Im Jahr 2015 kostete in Deutschland eine Arbeitsstunde in der Privatwirtschaft 32,7 Euro. Wie im Vorjahr belegt Deutschland damit im europäischen Länderranking den achten Platz. Mit einer Veränderungsrate von 2,7 % stiegen die Arbeitskosten in Deutschland im Jahr 2017 stärker als im europäischen Durchschnitt. In den meisten Krisenländern stagnierten oder sanken die Arbeitskosten erneut. In Deutschland sind im Jahr 2015 die Arbeitskosten im Verarbeitenden Gewerbe mit 2,7 % genauso stark gestiegen wie im Privaten Dienstleistungssektor. Damit hat sich der prozentuale Abstand zwischen beiden Wirtschaftsbereichen zwar nicht erhöht, beträgt aber immer noch wie im letzten Jahr über 21%. Das ist der größte Abstand zwischen den Sektoren von allen EU Mitgliedsländern. Die Anpassungsprozesse der Krisenländer haben sich auch im Jahr 2015 fortgesetzt, so dass die durchschnittliche Lohnstückkostenentwicklung des Euroraums mit 1% deutlich unter der Zielinflationsrate der EZB von knapp 2 % lag. Damit entwickelt sich der Euroraum als Ganzes nicht stabilitätskonform. In Deutschland stiegen die Lohnstückkosten um 2 %. Da die deutschen Lohnstückkosten aber seit Beginn der Währungsunion deutlich schwächer gestiegen sind, als mit dem Inflationsziel der EZB vereinbar, sollten die Löhne in Deutschland über mehrere Jahre hinweg deutlich überdurchschnittlich steigen, um den Anpassungsprozess der Krisenländer zu unterstützen." (Autorenreferat, IAB-Doku)

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Krogh, Tord S. (2016): Real wage rigidity and the unemployment volatility puzzle in small open economies. In: Oxford economic papers, Jg. 68, H. 1, S. 131-151. DOI:10.1093/oep/gpv059

Abstract

"Standard search models of the labour market feature a volatility puzzle: labour market variables move too little in response to productivity shocks. I investigate if real wage rigidity is sufficient to solve this in an open economy. Starting from a closed economy benchmark in which wage rigidity makes labour market variables sufficiently volatile, I find that the puzzle reopens in the open economy, despite a rigid real wage. This is because terms of trade movements move the wedge between the consumer and producer real wage in such a way that labour market variables respond less to productivity shocks. A quantitative exercise shows that the effect of this mechanism can be sizeable." (Author's abstract, IAB-Doku) ((en))

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Kátay, Gábor (2016): Do firms provide wage insurance against shocks? In: The Scandinavian journal of economics, Jg. 118, H. 1, S. 105-128. DOI:10.1111/sjoe.12128

Abstract

"Implicit contract models imply that it is Pareto optimal for risk-neutral firms to provide insurance to risk-averse workers against shocks. Using a matched employer - employee dataset, I evaluate wage responses to both permanent and transitory shocks in Hungary, and compare my results to similar studies on Italian, Portuguese, German, and French datasets. I find that the magnitude of the wage response differs depending on the nature of the shock. Broadly speaking, the wage response to permanent shocks is twice the size of the response to transitory shocks. Unlike previous findings, my results show that full insurance against transitory shocks is rejected." (Author's abstract, Published by arrangement with John Wiley & Sons) ((en))

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Limbers, Jan, Thieß Petersen & Michael Böhmer (2016): Lohnimpulse und Wirtschaftswachstum. Eine Simulationsanalyse für die Eurozone. In: Wirtschaftsdienst, Jg. 96, H. 2, S. 122-127. DOI:10.1007/s10273-016-1936-x

Abstract

"Seit der globalen Finanz- und Wirtschaftskrise und der sich daran anschließenden Staatsschuldenkrise stellt sich die Frage, ob die Krisenländer durch eine Verbesserung ihrer internationalen preislichen Wettbewerbsfähigkeit auf einen stabilen Wachstumspfad zurückkehren können, z.B. durch Lohnzurückhaltung. Anhand von Simulationsrechnungen für unterschiedliche Lohnsetzungsstrategien auf europäischer Ebene bis 2030 werden deren Vor- und Nachteile diskutiert." (Autorenreferat, © Springer-Verlag)

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Merkl, Christian & Heiko Stüber (2016): Wage cyclicalities and labor market dynamics at the establishment level. Theory and evidence. (FAU Discussion papers in economics 12/2016), Nürnberg, 34 S.

Abstract

"This paper analyzes the effects of different wage cyclicalities on labor market flow dynamics at the establishment level. We derive a model that allows for heterogeneous wage cyclicalities across firms over the business cycle and confront the theoretical results with the new AWFP dataset, which comprises the entire universe of German establishments. In line with theory, establishments with more procyclical wage movements over the business cycle have a more countercyclical hires rate and employment behavior. This result is robust when we look at certain sectors and states. Wage cyclicalities do not only have the expected qualitative impact on stocks and flows, but the quantitative responses are also in line with the proposed model. More generally, our empirical results provide support for theories that lead to an effect of wage rigidities on labor market flow dynamics." (Author's abstract, IAB-Doku) ((en))

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Pischke, Jörn-Steffen (2016): Wage flexibility and employment fluctuations. Evidence from the housing sector. (CEP discussion paper 1440), London, 24 S.

Abstract

"Many economists suspect that downward nominal wage rigidities in ongoing labor contracts are an important source of employment fluctuations over the business cycle but there is little direct empirical evidence on this conjecture. This paper compares three occupations in the housing sector with very different wage setting institutions, real estate agents, architects, and construction workers. I study the wage and employment responses of these occupations to the housing cycle, a proxy for labor demand shocks to the industry. The employment of real estate agents, whose pay is far more flexible than the other occupations, indeed reacts less to the cycle than employment in the other occupations. However, unless labor demand elasticities are large, the estimates do not suggest that the level of wage flexibility enjoyed by real estate agents would buffer employment fluctuations in response to demand shocks by more than 10 to 20 percent compared to completely rigid wages." (Author's abstract, IAB-Doku) ((en))

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Benigno, Pierpaolo, Luca Antonio Ricci & Paolo Surico (2015): Unemployment and productivity in the long run. The role of macroeconomic volatility. In: The Review of Economics and Statistics, Jg. 97, H. 3, S. 698-709. DOI:10.1162/REST_a_00508

Abstract

This paper presents a new empirical regularity between the volatility of productivity growth and long-run unemployment for a given level of long-run productivity growth. A theoretical framework based on asymmetric real wage rigidities is shown to have the potential to rationalize this finding. The model tends to fit U.S. long-run unemployment better than a specification based on long-run productivity growth only, especially during the Great Moderation and the Great Recession.

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Caju, Philip du, Theodora Kosma, Martina Lawless, Julián Messina & Tairi Rõõm (2015): Why firms avoid cutting wages. Survey evidence from European firms. In: ILR review, Jg. 68, H. 4, S. 862-888. DOI:10.1177/0019793915586973

Abstract

"Firms very rarely cut nominal wages, even in the face of considerable negative economic shocks. The authors of this article use a unique survey of 14 European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why the firms avoid cutting wages. They examine how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations for the infrequency of wage cuts. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in Western European (EU-15) countries but were one of the lowest-ranked obstacles in the new EU member-states in Central and Eastern Europe." (Author's abstract, IAB-Doku) ((en))

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Deelen, Anja & Wouter Verbeck (2015): Measuring downward nominal and real wage rigidity. Why methods matter. (CPB discussion paper / CPB Netherlands Bureau for Economic Policy Analysis 315), Den Haag, 33 S.

Abstract

"Although wage rigidity is an important topic, there is no full consensus in the literature on how to measure downward nominal and real wage rigidity. We conceptually and empirically compare the three commonly used methods for estimating wage rigidity: the simple approach as developed by the International Wage Flexibility Project (IWFP), the model based IWFP approach and the Maximum Likelihood approach. We estimate the three models on administrative panel data at the individual level for the Netherlands (2006-2012). One main finding is that assumptions regarding the 'notional' wage change distribution (which would prevail in the absence of wage rigidity) are an important determinant of the level of wage rigidity measured. We conclude that the model-based IWFP approach is the preferred model of the three, for it has the most sophisticated method to address measurement error and the assumptions regarding the wage change distribution that would prevail in absence of wage rigidity are most plausible.
Furthermore we have researched the correlation between wage rigidity and worker and firm characteristics. Although the methods do not agree on the amount of rigidity, they agree for a large part on what variables have a positive or negative relation with downward nominal or real wage rigidity. We find that the presence of wage rigidity is unevenly distributed among groups of workers: downward nominal and real wage rigidity in the Netherlands are positively related to a higher age, higher education, open-end contracts, full-time contracts and to working in a firm that experiences zero or positive employment growth. The consistency in the findings regarding the determinants of wage rigidity indicate that all three methods measure the same phenomenon, which implies that estimates of determinants of wage rigidity can be compared over countries using any of the three methods. However, for measuring the fraction of workers covered by downward nominal or real wage rigidity, the choice of the method matters.
Besides, we contribute to the literature by providing accurate, internationally comparable estimates of wage rigidity in the Netherlands. The overall picture is that the Netherlands has a less than average amount of downward nominal wage rigidity but and an above average level of downward real wage rigidity, compared internationally." (Author's abstract, IAB-Doku) ((en))

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Dias, Daniel A., Carlos R. Marques & Fernando Martins (2015): A replication note on downward nominal and real wage rigidity. Survey evidence from European firms. In: Empirical economics, Jg. 49, H. 3, S. 1143-1152. DOI:10.1007/s00181-014-0902-y

Abstract

"This note shows that the models estimated in Babecký et al. (Scand J Econ 112(4):884 - 910, 2010) do not allow identifying the determinants of downward nominal wage rigidity and provides new empirical evidence on the importance of downward nominal wage rigidity and its determinants in several European countries." (Author's abstract, IAB-Doku) ((en))

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Hristov, Atanas (2015): The high sensitivity of employment to agency costs. The relevance of wage rigidity. In: Journal of macroeconomics, Jg. 45, H. September, S. 137-154. DOI:10.1016/j.jmacro.2015.04.007

Abstract

"The paper studies the interaction between financing constraints and labor market imperfections and the role of this interaction on labor market dynamics. In the model economy, a positive productivity shock is amplified through endogenous fluctuations in the financial market. The paper shows that if wages are set via Nash bargaining, the productivity shock substantially increases wage volatility and, as a result, the shock has very little effect on firm profitability and hiring workers over the business cycle. When the model includes wage rigidities, however, firms' profitability becomes highly responsive to productivity changes: the financial accelerator mechanism induces additional fluctuations in labor market quantities, as observed in the data." (Author's abstract, IAB-Doku) ((en))

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Martins, Fernando (2015): What survey data reveal about price and wage rigidity in Portugal. In: Labour, Jg. 29, H. 3, S. 291-309. DOI:10.1111/labr.12056

Abstract

"This paper exploits the information collected from a survey conducted on a sample of Portuguese firms to study the patterns of firms' price and wage adjustments and the extent of nominal price and wage rigidities. The evidence shows that the frequency of price changes varies substantially across sectors and depends on the intensity of competition, the share of labor costs and firms' price reviewing behavior. The results also suggest that the constraint imposed by the presence of downward nominal wage rigidity is less important in firms where the fraction of permanent and high-skilled workers is lower and the share of flexible pay components is higher." (Author's abstract, IAB-Doku) ((en))

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Smith, Jennifer C. (2015): Pay growth, fairness, and job satisfaction. Implications for nominal and real wage rigidity. In: The Scandinavian journal of economics, Jg. 117, H. 3, S. 852-877. DOI:10.1111/sjoe.12091

Abstract

"Theories of wage rigidity often rely on a positive relationship between pay changes and utility, arising from concern for fairness or gift exchange. Supportive evidence has emerged from laboratory experiments, but the link has not yet been established with field data. This paper contributes a first step, using representative British data. Workers care about the level and the growth of earnings. Below-median wage increases lead to an insult effect, except when similar workers have real wage reductions or when firm production is falling. Nominal pay cuts appear to be insulting even when the firm is doing badly." (Author's abstract, IAB-Doku) ((en))

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Barattieri, Alessandro, Susanto Basu & Peter Gottschalk (2014): Some evidence on the importance of sticky wages. In: American Economic Journal. Macroeconomics, Jg. 6, H. 1, S. 70-101. DOI:10.1257/mac.6.1.70

Abstract

"We present evidence on the frequency of nominal wage adjustment using SIPP data adjusted for measurement error. The SIPP is a representative sample of the US population. Our main results are: (i) The average quarterly probability of a nominal wage change is between 21.1 and 26.6 percent, depending on the assumptions used. (ii) Wage changes are much more likely when workers change jobs. (iii) The frequency of wage adjustment does not display significant seasonal patterns. (iv) The hazard of a nominal wage change first increases and then decreases, with a peak at 12 months." (Author's abstract, IAB-Doku) ((en))

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Bičáková, Alena (2014): The trade-off between unemployment and wage inequality revisited. (CERGE-EI working paper 502), Prag, 42 S.

Abstract

"The Krugman hypothesis attributes high wage inequality in the US and high unemployment in continental Europe in the 1980s to the same negative change in the demand for the low skilled under different degrees of wage rigidity. This paper revisits the hypothesis in order to explain the labor market developments in France, the UK, and the US in the 1990s. We estimate a labor supply and labor demand model with heterogenous types of labor to analyze the effects of market forces and wage rigidity on changes in skill-group labor market outcomes. The results provide evidence in favor of the Krugman hypothesis when France is compared to the US and the UK. We also find support for an extended version of the Krugman hypothesis, which suggests that, when labor supply is sensitive to wages, there is a trade-off between unemployment on one hand, and wage inequality and inactivity on the other." (Author's abstract, IAB-Doku) ((en))

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Blundell, Richard, Claire Crawford & Wenchao Jin (2014): What can wages and employment tell us about the UK's productivity puzzle? In: The economic journal, Jg. 124, H. 576, S. 377-407. DOI:10.1111/ecoj.12138

Abstract

"As in many European countries, labour productivity in the UK has been stagnant since the start of the Great Recession. This article uses individual data on employment and wages to try to understand whether real wage flexibility can help shed light on the UK's productivity puzzle. It finds, perhaps unsurprisingly, that workforce composition cannot explain the reduction in wages and hence productivity that we observe, even compared to previous recessions; instead, real wages have fallen significantly within jobs this time round. Why? One possibility we investigate is that the labour supply in the UK is higher compared to previous recessions." (Author's abstract, IAB-Doku) ((en))

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Gilleskie, Donna & Denise Hoffman (2014): Health capital and human capital as explanations for health-related wage disparities. In: Journal of Human Capital, Jg. 8, H. 3, S. 235-279. DOI:10.1086/677855

Abstract

"We use a dynamic modeling strategy to evaluate two potential avenues through which health differences generate a wage gap: directly through reductions in health capital and indirectly through employment transitions that reduce human capital (specifically, occupation and employer tenure). Our results suggest that male workers with a moderate disability are 23 percent more likely to change occupations or employers than nondisabled men. Compared to those who do not make a transition, workers with a moderate disability who change occupations and employers experience an immediate $0.30 decline in hourly wages on top of a $0.57 decline associated with the disability onset." (Author's abstract, IAB-Doku) ((en))

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Gregg, Paul, Stephen Machin & Marina Fernandez-Salgado (2014): Real wages and unemployment in the big squeeze. In: The economic journal, Jg. 124, H. 576, S. 408-432. DOI:10.1111/ecoj.12139

Abstract

"UK real wage growth has slowed down, stagnated and recently turned sharply negative. We document the nature of real wage changes across the wage distribution over the last three decades, showing that recent patterns represent a distinct break of trend that pre-dates the onset of recession. We explore whether unemployment has become a stronger moderating influence on real wage growth and report, using aggregate economy-wide and regional panel data, that real wage - unemployment sensitivities have become stronger in the period from 2003 onwards. Finally, we offer some assessment of possible drivers of this increased sensitivity of real wages to unemployment." (Author's abstract, IAB-Doku) ((en))

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Holden, Steinar & Fredrik Wulfsberg (2014): Wage rigidity, inflation, and institutions. In: The Scandinavian journal of economics, Jg. 116, H. 2, S. 539-569. DOI:10.1111/sjoe.12052

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." (Author's abstract, IAB-Doku) ((en))

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Messina, Julián & Anna Sanz-de-Galdeano (2014): Wage rigidity and disinflation in emerging countries. In: American Economic Journal. Macroeconomics, Jg. 6, H. 1, S. 102-133. DOI:10.1257/mac.6.1.102

Abstract

"This paper examines the consequences of rapid disinflation for downward wage rigidities in two emerging countries, Brazil and Uruguay. Although wage rigidities are altered by disinflation, in neither of the two countries does price stability eliminate frictions in wage-setting mechanisms. In a context of individual wage negotiations and weak unions, disinflation in Uruguay puts an end to its history of indexation, but strong resistance to nominal wage cuts emerges. In strongly unionized Brazil, wage indexation is highly persistent, but the introduction of inflation targeting by the Central Bank in 1999 moves the focal point of wage negotiations to expected inflation." (Author's abstract, IAB-Doku) ((en))

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Raurich, Xavier & Valeri Sorolla (2014): Growth, unemployment and wage inertia. In: Journal of macroeconomics, Jg. 40, H. June, S. 42-59. DOI:10.1016/j.jmacro.2014.02.007

Abstract

"We introduce wage setting via efficiency wages in the neoclassical one-sector growth model to study the growth effects of wage inertia. We compare the dynamic equilibrium of an economy with wage inertia with the equilibrium of an economy without it. We show that wage inertia affects the long run employment rate and that the transitional dynamics of the main economic variables will be different because wages are a state variable when wage inertia is introduced. In particular, we show that the model with wage inertia can explain some growth patterns that cannot be explained when wages are flexible. We also study the growth effects of permanent technological and fiscal policy shocks in these two economies. During the transition, the growth effects of technological shocks obtained when wages exhibit inertia may be the opposite of those obtained when wages are flexible. These technological shocks may have long run effects if there is wage inertia." (Author's abstract, IAB-Doku) ((en))

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Avouyi-Dovi, Sanvi, Denis Fougère & Erwan Gautier (2013): Wage rigidity, collective bargaining and the minimum wage. Evidence from French agreement data. In: The Review of Economics and Statistics, Jg. 95, H. 4, S. 1337-1351. DOI:10.1162/REST_a_00329

Abstract

"Using data sets on wage agreements at both industry and firm levels in France, we document stylized facts on wage stickiness. The average duration of wages is a little less than one year, and 10% of wages are modified each month by a wage agreement. The frequency of wage change agreements is staggered over the year, but the frequency of effective wage changes is seasonal. The national minimum wage has a significant impact on the probability and the seasonality of wage changes. Negotiated wage increases are correlated with inflation, minimum wage increases, and firm profitability." (Author's abstract, IAB-Doku) ((en))

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Bukowski, Maciej, Grzegorz Koloch & Piotr Lewandowski (2013): Shocks and rigidities as determinants of CEE labour markets' performance. A panel SVECM approach. In: Economics of Transition, Jg. 21, H. 3, S. 553-581. DOI:10.1111/ecot.12017

Abstract

"In this article, the impact of real wage, productivity, labour demand and supply shocks on eight Central and Eastern European (CEE) economies from 1996-2007 is analysed with a panel structural vector error correction model. A set of long-run restrictions derived from the dynamic stochastic general equilibrium (DSGE) model is used to identify structural shocks, and fluctuations in foreign demand are controlled for. We find that the propagation of shocks on CEE labour markets resembles that found for OECD countries. Labour demand shocks emerge as the main determinant of employment and unemployment variability in the short-to-medium run, but wage rigidities were equally important for observed labour market performance, especially in Poland, Czech Republic and Lithuania. We associate these rigidities with collective bargaining, minimum wage, active labour market policies and employment protection legislation." (Author's abstract, IAB-Doku) ((en))

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Dias, Daniel A., Carlos Robalo Marques & Fernando Martins (2013): Wage rigidity and employment adjustment at the firm level. Evidence from survey data. In: Labour economics, Jg. 23, H. August, S. 40-49. DOI:10.1016/j.labeco.2013.02.001

Abstract

"This paper uses firm level survey data from Portugal to investigate how firms adjust their labour costs in the presence of wage rigidities. We document that Portuguese firms, besides reducing employment or freezing nominal base wages, also make frequent use of other cost-cutting strategies, like freezing or cutting bonuses and other monetary or non-monetary benefits, slowing down or freezing the rate at which promotions are filled, or recruiting new employees at wages lower than those received by the employees that have left the firm. We show that the utilization of these different adjustment strategies is affected by workers' and firms' attributes, as well as by some indicators of the economic environment in which firmsoperate. More importantly, we provide evidence that firms with more flexible base wages are less likely to reduce employment, and that such effect may be significantly strengthened by the availability of alternative labour-cost adjustment margins that firms can use in bad times." (Author's abstract, IAB-Doku) ((en))

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Haefke, Christian, Marcus Sonntag & Thijs van Rens (2013): Wage rigidity and job creation. In: Journal of monetary economics, Jg. 60, H. 8, S. 887-899. DOI:10.1016/j.jmoneco.2013.09.003

Abstract

"Recent research in macroeconomics emphasizes the role of wage rigidity in accounting for the volatility of unemployment fluctuations. We use worker-level data from the CPS to measure the sensitivity of wages of newly hired workers to changes in aggregate labor market conditions. The wage of new hires, unlike the aggregate wage, is volatile and responds almost one-to-one to changes in labor productivity. We conclude that there is little evidence for wage stickiness in the data. We also show, however, that a little wage rigidity goes a long way in amplifying the response of job creation to productivity shocks." (Author's abstract, IAB-Doku) ((en))

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Knell, Markus (2013): Nominal and real wage rigidities. In theory and in Europe. In: Journal of macroeconomics, Jg. 36, H. June, S. 89-105. DOI:10.1016/j.jmacro.2013.01.006

Abstract

"In this paper I study the relation between real wage rigidity (RWR) and nominal price and wage rigidity. I show that in a standard DSGE model RWR is mainly affected by the interaction of the two nominal rigidities and not by other structural parameters. The degree of RWR is, however, considerably influenced by the modelling assumption about the structure of wage contracts (Calvo vs. Taylor) and about other institutional characteristics of wage-setting (clustering of contracts, heterogeneous contract length, indexation). I use survey evidence on price- and wage-setting for 15 European countries to calculate the degrees of RWR implied by the theoretical model. The average level of RWR is broadly in line with empirical estimates based on macroeconomic data. In order to be able to also match the observed cross-country variation in RWR it is, however, essential to move beyond the country-specific durations of price and wages and to take more institutional details into account." (Author's abstract, IAB-Doku) ((en))

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Rhee, Hyuk Jae & Jeongseok Song (2013): Real wage rigidities and optimal monetary policy in a small open economy. In: Journal of macroeconomics, Jg. 37, H. September, S. 110-127. DOI:10.1016/j.jmacro.2013.04.004

Abstract

"The main objective of the study is to provide a theoretical analysis of optimal monetary policy in a small open economy where households set real wage in a staggered fashion. The introduction of real wage rigidities plays a important role to resolve main shortcomings of the standard new Keynesian small open economy model. The main findings regarding the issue of monetary policy design can be summarized as three fold. First, the optimal policy is to seek to minimize variance of domestic price inflation, real wage inflation, and the output gap if both domestic price and real wage are sticky. Second, controlling CPI inflation directly or indirectly induces relatively large volatility in output gap and other inflations. Therefore, both CPI inflation-based Taylor rule and nominal wage-inflation based Taylor rule are suboptimal. Last, a policy that responds to a real wage inflation is most desirable." (Author's abstract, IAB-Doku) ((en))

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Stüber, Heiko (2013): Real wage cyclicality of newly hired workers. (FZID discussion papers 2013/62), Hohenheim, 33 S.

Abstract

"Several recent macroeconomic models rely on rigid wages. Especially wage rigidity of newly hired workers seems to play a crucial rote, since the decision of opening a vacancy or not is mainly influenced by their real wages. However, so far little empirical evidence exists on how real wages of newly hired workers react to business cycle conditions. This paper aims at filling this gap for a large economy, namely Germany, by analyzing the cyclical behavior of real wages of newly hired workers while controlling for 'cyclical up- and downgrading' in employer/employee matches. For the analysis two endogenous variables are used: either the 'typical' (e.g. modal) real wages paid to entrants into particular jobs of particular firms or entrants' individual real wages. The results show that entry-wages are not rigid, but considerably respond to business cycle conditions. This finding strengthens Pissarides' (2009) dismissal of theories based on cyclically rigid hiring wages. Furthermore, I show that the procyclicality of the employment/population ratio is (nearly) identical to the procyclicality of real entry-wages." (Author's abstract, IAB-Doku) ((en))

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Stüber, Heiko (2013): Wage rigidity in Germany. (IAB-Bibliothek 340), Bielefeld: Bertelsmann, 149 S. DOI:10.3278/300806w

Abstract

"Die Interaktion zwischen Inflation und Arbeitslosigkeit beschäftigt Forscher und Politiker bereits eine längere Zeit. Doch existiert tatsächlich ein Zielkonflikt zwischen Inflation und Arbeitslosigkeit? Der Autor geht dieser und anderen Fragen, die sich mit Lohnstarrheit beschäftigen, nach. Der erste und gewichtigste Teil des Buches beschäftigt sich mit Abwärtsnominallohnstarrheit. Er bietet einen Überblick über Ursachen, Ausmaß und Implikationen dieser Starrheit, betrachtet ihre makroökonomischen Konsequenzen und untersucht, inwiefern die Starrheit Arbeitnehmer unterschiedlich betrifft. Der zweite Teil des Buches beschäftigt sich mit der Reallohnrigidität neu eingestellter Arbeitnehmer über den Konjunkturzyklus. Der Buchteil bietet einen kurzen Überblick bisheriger empirischer Untersuchungen und neuester Entwicklungen und stellt empirische Evidenz zur Zyklizität von Einstiegslöhnen in Deutschland bereit." (Autorenreferat, IAB-Doku)

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Wisman, Jon D. (2013): Wage stagnation, rising inequality and the financial crisis of 2008. In: Cambridge Journal of Economics, Jg. 37, H. 4, S. 921-945. DOI:10.1093/cje/bes085

Abstract

"Explanations of the financial crisis of 2008 have centred upon inadequate regulation stemming from laissez-faire ideology and low interest rates. Although true, the deeper determining forces of wage stagnation and dramatically increasing inequality in the USA over the preceding 35 years have received less notice. Wage stagnation and heightened inequality generated three dynamics that made the economy vulnerable to systemic dysfunction. First, consumption was constrained, reducing profitable investment potential in the real economy and encouraging an ever-wealthier elite to flood financial markets with credit, helping keep interest rates low, stimulating the creation of new credit instruments, greater indebtedness and speculation. The second dynamic is that consumption externalities were generated, forcing households to struggle harder to maintain the welfare of their families and their relative social status, resulting in plummeting household saving, ever-greater indebtedness and longer work hours. The third dynamic is that as the rich took larger shares of income and wealth, they gained more command over ideology and hence politics, resulting in tax cuts for the rich, reduced welfare for the poor and deregulation." (Author's abstract, IAB-Doku) ((en))

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Europäische Kommission. Generaldirektion Wirtschaft und Finanzen (2013): Benchmarks for the assessment of wage developments. (European economy. Occasional papers 146), Brüssel, 30 S. DOI:10.2765/47648

Abstract

"As the uncertainty relating to the sovereign debt crisis in some Euro Area Member States continued over the last two years, the extent and potential consequences of the spillovers between euro area Member States' economic, financial and budgetary situations has become increasingly evident.
Assessing the implications of wage developments for the build-up and correction of macroeconomic imbalances is a key analytical foundation of In Depth Reviews (IDRs). Such an assessment has to determine whether growth in labour costs is compatible with orderly developments in price competitiveness or with standard responses to economic fundamentals. This paper presents two benchmarks to this end: the first is based on wage growth consistent with constant price competitiveness; the second assumes that wage growth is consistent with changes in economic fundamentals (changes in labour productivity, unemployment and inflation)." (Author's abstract, IAB-Doku) ((en))

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Babecký, Jan, Philip Du Caju, Theodora Kosma, Martina Lawless, Julián Messina & Tairi Rõõm (2012): How do European firms adjust their labour costs when nominal wages are rigid? In: Labour economics, Jg. 19, H. 5, S. 792-801. DOI:10.1016/j.labeco.2012.03.010

Abstract

"Although workers' nominal wages are seldom cut, firms have multiple options available if they require adjustments in their wage bills. We broaden the analysis of relative (in)flexibility in labour costs by investigating the use of other margins of labour cost adjustment at the firm level beyond base wages. Using data from a unique survey, we find that European firms make extensive use of other components of compensation to adjust the cost of labour. Interestingly, firms facing base wage rigidity are more likely to use alternative margins of labour cost adjustment; therefore there appears to be some degree of substitutability between wage flexibility and the flexibility of other cost components. Changes in bonuses and non-pay benefits are some of the potentialmargins firms use to reduce costs. We also show howthe margins of adjustment chosen are affected by unionisation and firm and worker characteristics." (Author's abstract, IAB-Doku) ((en))

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Bartolucci, Cristian (2012): Business cycles and wage rigidity. In: Labour economics, Jg. 19, H. 4, S. 568-583. DOI:10.1016/j.labeco.2012.05.004

Abstract

"In this paper, we analyze the impact of downward wage rigidity on the labor market dynamics. We shows that imposing downward wage rigidity in a matching model with cyclical fluctuations in productivity, endogenous match-destruction, and on-the-job search, quits are procyclical and layoffs countercyclical. Using the European Community Household Panel (ECHP), we provide evidence that downward wage rigidity is empirically relevant in ten European countries. Finally, we show that layoffs are countercyclical and quits are procyclical, as predicted by the model." (Author's abstract, IAB-Doku) ((en))

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Bellou, Andriana & Baris Kaymak (2012): Wages, implicit contracts, and the business cycle. Evidence from a European panel. In: Labour economics, Jg. 19, H. 6, S. 898-907. DOI:10.1016/j.labeco.2012.08.003

Abstract

"We study the joint behavior of hours and wages over the business cycle in a unique panel of 13 European countries, and document significant history dependence in wages. Workers who experience favorable market conditions during their tenure on the job have higher wages, and work fewer labor hours. Unobserved differences in productivity, such as varying job quality, or match-specific productivity are not likely to explain this variation. The results instead point to the importance of contractual arrangements in wage determination. In economies with decentralized bargaining practices, such arrangements resemble self-enforcing insurance contracts with one-sided commitment (by the employer). On the other hand, in countries with strong unions and centralized wage bargaining, wage behavior is better approximated by full-commitment insurance contracts. The co-movement of hours and wages further confirms a contractual framework with variable worker hours. Despite the strong prevalence of contracts in Europe, however, the elasticity of labor supply is considerably smaller compared to the U.S. labor market." (Author's abstract, IAB-Doku) ((en))

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Bihan, Hervé Le, Jérémi Montornès & Thomas Heckel (2012): Sticky wages: evidence from quarterly microeconomic data. In: American Economic Journal. Macroeconomics, Jg. 4, H. 3, S. 1-32. DOI:10.1257/mac.4.3.1

Abstract

"Using an original micro-dataset from France, we investigate nominal wage stickiness. Nominal wage changes are found to occur at a quarterly frequency of around 38 percent over our sample period, and to be to a large extent staggered across establishments, and very synchronized within establishments. We carry out an econometric analysis of wage changes based on a two-threshold sample selection model. Our results are that the timing of wage adjustments is time-dependent as opposed to state-dependent, there is evidence of predetermination in wage changes, and both backward and forward-looking behavior is relevant in wage setting." (Author's abstract, IAB-Doku) ((en))

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Domingues dos santos, Manon & Etienne Lehmann (2012): Wage rigidity or fiscal redistribution. The credibility issue. In: Economics Bulletin, Jg. 32, H. 4, S. 2801-2807.

Abstract

"We show that lack of commitment in the policymaking process may explain the prevalence of the minimum wage to redistribute income, despite its negative impact on unemployment. In the absence of commitment, firms anticipate the government's willingness to use a minimum wage policy to reduce the tax collecting costs implied by fiscal transfers. This expectation leads to a reduction in the labor demand that generates unemployment." (Author's abstract, IAB-Doku) ((en))

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Druant, Martine, Silvia Fabiani, Gabor Kezdi, Ana Lamo, Fernando Martins & Roberto Sabbatini (2012): Firms' price and wage adjustment in Europe. Survey evidence on nominal stickiness. In: Labour economics, Jg. 19, H. 5, S. 772-782. DOI:10.1016/j.labeco.2012.03.007

Abstract

"This paper presents new evidence on the patterns of price and wage adjustment in European firms and on the extent of nominal rigidities. It uses a unique dataset collected through a firm-level survey conducted in 17 European countries and covering various sectors. Several conclusions are drawn from this evidence. Firms adjust wages less frequently than prices, on average every 15 and 10 months, respectively. Price and, especially, wage adjustment exhibit a substantial degree of time-dependence. In particular, wage changes tend to cluster at a specific time of the year, mostly January in the majority of countries. The results of a multivariate analysis indicate that prices are more flexible when competitive pressures in product markets are strong and when labor costs account for a lower fraction of firms' total costs,whereas wages are more flexible when bargaining is decentralized and when the coverage of collective bargaining and the stringency of employment protection legislation are low. Price rigidities are higher in firms with a larger share of high-skilled/white-collar workers." (Author's abstract, IAB-Doku) ((en))

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Du Caju, Philip, Catherine Fuss & Ladislav Wintr (2012): Sectoral differences in downward real wage rigidity: workforce composition, institutions, technology and competition. In: Journal for labour market research, Jg. 45, H. 1, S. 7-22. DOI:10.1007/s12651-012-0100-3

Abstract

"Dieser Artikel untersucht, ob die branchenspezifischen Unterschiede in der Lohnstarrheit durch Unterschiede in der Arbeitskraftstruktur, Tariflohnverhandlung, Technologie und Wettbewerb hervorgerufen werden. Unsere Ergebnisse zeigen, personen- und firmenbezogenen Daten einer belgischen Sozialversicherungsstatistik von 1990 bis 2002 benutzend, dass die Abwärtsreallohnstarrheit höher für Angestellte, niedriger für ältere und besser verdienende Beschäftigte ist. Jenseits der durch die Arbeitskräftezusammensetzung bedingten Auswirkungen zeigen wir, dass Löhne in Branchen mit vorherrschend zentralisierter Lohnbildung auf Branchenebene im Vergleich zu Übereinkünften auf Firmenebene eine höhere Lohnstarrheit aufweisen. Gleiches gilt für arbeits- und wettbewerbsintensivere Branchen." (Autorenreferat, IAB-Doku)

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Gartner, Hermann, Thorsten Schank & Claus Schnabel (2012): The role of wage setting institutions on wage cyclicality. Some unexpected patterns from Germany. In: VOX H. 22.09.2012, S. 1-4.

Abstract

"It is often argued that trade unions lead to higher wages but, according to the findings presented in this column, collective bargaining cannot be blamed for sticky wages in Germany during the 1990s." (Author's abstract, IAB-Doku) ((en))

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Greiner, Alfred (2012): Transition dynamics in an AK growth model under wage rigidity. In: Mathematical Social Sciences, Jg. 63, H. 1, S. 50-56. DOI:10.1016/j.mathsocsci.2011.09.005

Abstract

"In this paper, we analyze the so-called AK endogenous growth model with persistent unemployment due to wage rigidities that result from labor market imperfections. We demonstrate that the existence of a balanced growth path implies that it is unique or that there exist two balanced growth paths, depending on the structural parameters of the model. The balanced growth path associated with the higher growth rate is saddle point stable, whereas the path yielding the lower long-run growth rate is either stable or unstable. Further, we show that a Hopf bifurcation may arise, giving rise to persistent limit cycles." (Author's abstract, IAB-Doku) ((en))

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Guerrazzi, Marco & Nicola Meccheri (2012): From wage rigidity to labour market institution rigidity. A turning-point in explaining unemployment? In: The Journal of Socio-Economics, Jg. 41, H. 2, S. 189-197. DOI:10.1016/j.socec.2011.12.001

Abstract

"In this paper we offer a critical discussion about the concept of labour market rigidity in the light of recent theoretical approaches that have aimed to provide sound micro-foundations to the presence of unemployment in market economies. We point out that the concept of labour market rigidity usually referred to in such theories has changed over time, involving in succession the rigidity of wages, contracts and labour market institutions. We also appraise the factors that lead labour market institutions rigidity, stressed by the search literature, to challenge the more widespread explanation of unemployment grounded on wage rigidity. Moreover, we analyse some theoretical and empirical issues that cast doubt on the ability to deal with unemployment, disentangling the role of institutional rigidities from that of wage stickiness." (Author's abstract, IAB-Doku) ((en))

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Haefke, Christian, Marcus Sonntag & Thijs van Rens (2012): Wage rigidity and job creation. (CEPR discussion paper 8968), London, 44 S.

Abstract

"Recent research in macroeconomics emphasizes the role of wage rigidity in accounting for the volatility of unemployment fluctuations. We use worker-level data from the CPS to measure the sensitivity of wages of newly hired workers to changes in aggregate labor market conditions. The wage of new hires, unlike the aggregate wage, is volatile and responds almost one-to-one to changes in labor productivity. We conclude that there is little evidence for wage stickiness in the data. We also show, however, that a little wage rigidity goes a long way in amplifying the response of job creation to productivity shocks." (Author's abstract, IAB-Doku) ((en))

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Horgos, Daniel (2012): International outsourcing and wage rigidity. In: Global economy journal, Jg. 12, H. 2, S. 1-28. DOI:10.1515/1524-5861.1844

Abstract

"In industrialized economies, International Outsourcing is often blamed for destroying jobs and thus, inducing unemployment. Since most contributions examining International Outsourcing assume flexible wages, they do not address these concerns directly. This paper adopts a rigid wage approach and investigates the differences occurring. As theoretical results and the empirical panel data estimations for Germany show, effects depend on industry aggregation, the industry's skill intensity, and the labor market institution. Only in industries characterized by wage rigidity, outsourcing significantly increases low skilled unemployment. Consequently, not International Outsourcing but inflexible labor market institutions instead should be blamed for destroying low skill jobs." (Author's abstract, IAB-Doku) ((en))

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Martins, Pedro S., Gary Solon & Jonathan P. Thomas (2012): Measuring what employers do about entry wages over the business cycle. A new approach. In: American Economic Journal. Macroeconomics, Jg. 4, H. 4, S. 36-55. DOI:10.1257/mac.4.4.36

Abstract

"Rigidity in real hiring wages plays a crucial role in some recent macroeconomic models. But are hiring wages really so noncyclical? We propose using employer/employee longitudinal data to track the cyclical variation in the wages paid to workers newly hired into specific entry jobs. Illustrating the methodology with 1982-2008 data from the Portuguese census of employers, we find real entry wages were about 1.8 percent higher when the unemployment rate was 1 percentage point lower. Like most recent evidence on other aspects of wage cyclicality, our results suggest that the cyclical elasticity of wages is similar to that of employment." (Author's abstract, IAB-Doku) ((en))

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Stüber, Heiko (2012): Are real entry wages rigid over the business cycle? Empirical evidence for Germany from 1977 to 2009. (IAB-Discussion Paper 06/2012), Nürnberg, 35 S.

Abstract

"Bisher gibt es wenig empirische Evidenz darüber, wie die Reallöhne neu eingestellter Arbeitnehmer auf den Konjunkturzyklus reagieren. Dieses Papier analysiert für Deutschland das zyklischen Verhaltens realer Einstiegslöhne unter Kontrolle von Arbeitnehmer/Arbeitgeber-Paarungen. Es zeigt sich, dass ein Anstieg der Arbeitslosenquote um einen Prozentpunkt zu etwa 1,27 Prozent niedrigeren realen Einstiegslöhnen führt. In Anbetracht dieser Volatilität scheint es, dass die Einführung von Lohnrigidität in das Mortensen-Pissarides-Modell, um realistische Volatilitäten der Arbeitslosigkeit zu erzeugen, nicht durch die empirischen Befunde gestützt wird." (Autorenreferat, IAB-Doku)

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Stüber, Heiko & Thomas Beissinger (2012): Does downward nominal wage rigidity dampen wage increases? In: European Economic Review, Jg. 56, H. 4, S. 870-887., 2012-02-15. DOI:10.1016/j.euroecorev.2012.02.013

Abstract

"Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a dataset comprising more than 169 million wage changes. We find evidence of a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets." (Author's abstract, IAB-Doku) ((en))

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Stüber, Heiko (2012): Downward nominal wage rigidity in a cross section. An analysis of linked employer-employee data for the years 1995 to 2007. In: Economics Bulletin, Jg. 32, H. 2, S. 1797-1812., 2012-06-27.

Abstract

"Applying unconditional quantile regression to a linked employer-employee dataset from Germany, I show that downward nominal wage rigidity (DNWR) affects workers not only at the lower tail of the wage change distribution but over the entire distribution. The effect of the inflation rate on the workers' wage changes differs between and within the percentiles of the wage change distribution. The effect is conditional on the workers' individual characteristics and on the firm characteristics, and the conditional effects also differ over the wage change distribution." (Author's abstract, IAB-Doku) ((en))

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Anspal, Sten & Janno Järve (2011): Downward nominal wage rigidity and gender. In: Labour, Jg. 25, H. 3, S. 370-385. DOI:10.1111/j.1467-9914.2011.00519.x

Abstract

"We test whether there are gender differences in downward rigidity, using Kahn's histogramlocation method and longitudinal registry data on all formally employed persons from the Estonian Tax and Customs Board. The results show that women resist pay cuts less than men. Also, in circumstances of increasing unemployment women's opposition to pay cuts decreases substantially, whereas men's attitudes towards pay cuts are not significantly affected by labour market conditions." (Author's abstract, IAB-Doku) ((en))

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Asadra, Toichiro, Peter Flaschel, Alfred Greiner & Christian Proano (2011): Sustainable capitalism: full-employment flexicurity growth with real wage rigidities. In: Journal of Economic Behavior and Organization, Jg. 77, H. 3, S. 248-264.

Abstract

"In dieser Studie stellen wir ein Flexicurity-Kapitalismus-Modell mit einem zweiten Arbeitsmarkt und dem Staat als einem 'employer of first resort' vor, in dem alle Arbeiter, die nicht im privaten Sektor beschäftigt sind, eine sinnvolle Beschäftigung finden. Wir zeigen, dass das Modell durch ein asymptotisch stabiles Gleichgewicht gekennzeichnet ist unter einer Reallohn-Anpassungsdynamik, wie analysiert in Blanchard und Katz (1999), und unter einem Typ von Okuns Gesetz, das den Auslastungsgrad in den Firmen zu ihrer 'hiring and firing'-Entscheidung in Verbindung setzt. Es konnte auch gezeigt werden, dass die Einführung eines Pensionsfonds der Unternehmen zur Viabilität des untersuchten ökonomischen Systems beiträgt. Dennoch führt die Einführung von Kredit in das Modell dazu, dass anstatt angebotsseitigen, von Ersparnissen getriebenen Konjunkturzyklen nachfrageseitige, von Investitionsnachfrage getriebene Fluktuationen (von einer wahrscheinlich volatileren Art) stattfinden können." (Autorenreferat, IAB-Doku)

Zitatform

Avouyi-Dovi, Sanvi, Denis Fougère & Erwan Gautier (2011): Wage rigidity, collective bargaining and the minimum wage. Evidence from French agreement data. (IZA discussion paper 5835), Bonn, 34 S.

Abstract

"Using several unique data sets on wage agreements at both the firm- and the industry-levels in France, we examine the impact of typical European wage-setting institutions on the form and the degree of wage rigidity. We highlight different stylized facts concerning wage stickiness. First, in France, the typical duration of a wage agreement is one year. Consequently, a Taylor (1980) -type model appears to reproduce appropriately the distribution of agreement durations. Some 30 percent of settlements stipulate several predetermined wage changes during the year following the date of signature of the agreement. The frequency of wage agreements is highly seasonal, but the dates at which agreements take effect are more staggered. The date at which the national minimum wage level is revised each year has a significant impact on the timetable of wage agreements, both at the firm- and at the industry-levels. Wage increases negotiated at these two levels mainly depend on the inflation regime, the firm profitability and the proportion of minimum-wage workers in the same industry." (Author's abstract, IAB-Doku) ((en))