The Margins of Labor Cost Adjustment : Survey Evidence from European Firms
Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. This paper broadens the analysis beyond downward rigidity in base wages by investigating the use of other margins...
| Main Authors: | , , , , , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2009/12/11561638/margins-labor-cost-adjustment-survey-evidence-european-firms http://hdl.handle.net/10986/19954 |
| Summary: | Firms have multiple options at the time
of adjusting their wage bills. However, previous literature
has mainly focused on base wages. This paper broadens the
analysis beyond downward rigidity in base wages by
investigating the use of other margins of labor cost
adjustment at the firm level. Using data from a unique
survey, the authors find that firms make frequent use of
other, more flexible, components of compensation to adjust
the cost of labor. Changes in bonuses and non-pay benefits
are some of the potential margins firms use to reduce costs.
The paper also shows how the margins of adjustment chosen
are affected by firm and worker characteristics. |
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