How are firms' wages and prices linked: survey evidence in Europe

Martine Druant (), Silvia Fabiani (), Gabor Kezdig (), Ana Lamo, Fernando Martins and Roberto Sabbatini ()
Additional contact information
Martine Druant: National Bank of Belgium
Gabor Kezdig: Central European University
Authors registered in the RePEc Author Service: Gabor Kezdi

No 725, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

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 a broad range of countries and covering various sectors. Several conclusions are drawn from this evidence. Firms adjust wages less frequently than prices: the former tend to remain unchanged for about 15 months on average, the latter for around 10 months. The degree of price rigidity varies substantially across sectors and depends strongly on economic features, such as the intensity of competition, the exposure to foreign markets and the share of labour costs in total cost. Instead, country specificities, mostly related to the labour market�s institutional setting, are more relevant in characterising the pattern of wage adjustment. The latter also exhibits a substantial degree of time-dependence, as firms tend to concentrate wage changes in a specific month, mostly January in the majority of countries. Wage and price changes feed into each other at the micro level and there is a relationship between wage and price rigidity.

Keywords: survey; wage rigidity; price rigidity; indexation; labour market institutions; time dependence (search for similar items in EconPapers)
JEL-codes: D21 E30 J31 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-cba, nep-eec and nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (64)

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Related works:
Working Paper: How are firms’ wages and prices linked: survey evidence in Europe (2012)
Working Paper: How are firms' wages and prices linked: survey evidence in Europe (2009)
Working Paper: How are firms’ wages and prices linked: survey evidence in Europe (2009)
Working Paper: How are Firms’ Wages and Prices Linked: Survey Evidence in Europe (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_725_09

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