Downward Nominal and Real Wage Rigidity : Survey Evidence from European Firms
It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage...
| 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/2009/12/11561636/downward-nominal-real-wage-rigidity-survey-evidence-european-firms http://hdl.handle.net/10986/19955 |
| Summary: | It has been well established that the
wages of individual workers react little, especially
downwards, to shocks that hit their employer. This paper
presents new evidence from a unique survey of firms across
Europe on the prevalence of downward wage rigidity in both
real and nominal terms. The authors analyse which firm-level
and institutional factors are associated with wage rigidity.
The results indicate that it is related to workforce
composition at the establishment level in a manner that is
consistent with related theoretical models (e.g. efficiency
wage theory, insider-outsider theory). The analysis also
finds that wage rigidity depends on the labour market
institutional environment. Collective bargaining coverage is
positively related with downward real wage rigidity,
measured on the basis of wage indexation. Downward nominal
wage rigidity is positively associated with the extent of
permanent contracts and this effect is stronger in countries
with stricter employment protection regulations. |
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