Wage adjustment and employment in Europe

Petra Marotzke, Robert Anderton, Ana Bairrao, Clémence Berson and Peter Tóth

No 2016-19, Discussion Papers from University of Nottingham, GEP

Abstract: We explore the impact of wage adjustment on employment with a focus on the role of downward nominal wage rigidities. We use a harmonised survey dataset, which covers 25 European countries in the period 2010-2013. The main advantages of the data are firm-level information on the change in economic conditions and collective pay agreements. Our findings confirm the presence of wage rigidities in Europe: first, collective pay agreements reduce the probability of downward wage adjustment; second, the rise in the probability of downward base wage responses to a decrease in demand is significantly smaller than the rise in the probability of an upward wage response to an increase in demand. Estimation results point to a negative effect of downward wage rigidities on employment at the firm level.

Keywords: Wage rigidity; Employment; Demand shocks (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-eur
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Citations: View citations in EconPapers (18)

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Related works:
Working Paper: Asymmetric wage adjustment and employment in European firms (2017)
Working Paper: Asymmetric wage adjustment and employment in European firms (2017)
Working Paper: Asymmetric wage adjustment and employment in European firms (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:not:notgep:16/19

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