How Rigid Are Nominal-Wage Rates?

Allan Crawford

Staff Working Papers from Bank of Canada

Abstract: This study examines the effect of nominal-wage rigidities on wage growth in Canada using a hazard model and micro data for union contracts. The hazard model is specified in a way that allows considerable flexibility in the shape of the estimated notional wage-change distribution. This notional distribution is compared with the observed distribution to estimate the net effect of downward nominal-wage rigidity and menu costs on wage growth. Estimates from alternative versions of the model suggest that the net effect on the average annual growth rate of wages was in the range of 0.10 to 0.18 percentage points in the unionized private sector during the low-inflation period of the 1990s.

Keywords: Labour markets; Inflation targets (search for similar items in EconPapers)
JEL-codes: E24 E52 E61 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2001
New Economics Papers: this item is included in nep-lab, nep-ltv and nep-pbe
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Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:01-8

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