The Accuracy of Firms' Wage Inflation Expectations

Lukas Buchheim, Sebastian Link and Sascha Möhrle

AEA Papers and Proceedings, 2025, vol. 115, 261-65

Abstract: Much of recent survey-based macroeconomic research studies firms' aggregate price inflation expectations, but little is known about their expectations of own wage inflation. This paper examines the accuracy of wage inflation expectations using novel panel survey data from German firms. By comparing forecast errors for firms' own wage inflation and consumer price index inflation, we show that wage forecasts tend to be more accurate, and forecast errors for the two variables are positively correlated. Moreover, the analysis reveals that various firm characteristics and wage-setting factors, particularly collective bargaining agreements, predict the forecast accuracy of wage inflation.

JEL-codes: D22 D84 E24 E31 J31 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1257/pandp.20251018

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