How Wages Change: Micro Evidence from the International Wage Flexibility Project

William T. Dickens (), Lorenz Götte (), Erica Groshen, Steinar Holden, Julian Messina, Mark Schweitzer, Jarkko Turunen and Melanie E. Ward-Warmedinger ()
Additional contact information
William T. Dickens: Brookings Institution
Lorenz Götte: National University of Singapore
Melanie E. Ward-Warmedinger: European Central Bank
Authors registered in the RePEc Author Service: Lorenz Goette

No 2487, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: How do the complex institutions involved in wage setting affect wage changes? The International Wage Flexibility Project provides new microeconomic evidence on how wages change for continuing workers. We analyze individuals’ earnings in 31 different data sets from sixteen countries, from which we obtain a total of 360 wage change distributions. We find a remarkable amount of variation in wage changes across workers. Wage changes have a notably non-normal distribution; they are tightly clustered around the median and also have many extreme values. Furthermore, nearly all countries show asymmetry in their wage distributions below the median. Indeed, we find evidence of both downward nominal and real wage rigidities. We also find that the extent of both these rigidities varies substantially across countries. Our results suggest that variations in the extent of union presence in wage bargaining play a role in explaining differing degrees of rigidities among countries.

Keywords: downward real wage rigidity; downward nominal wage rigidity; wage change distributions; wage setting (search for similar items in EconPapers)
JEL-codes: E3 J3 J5 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2006-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (28)

Published - published in: Journal of Economic Perspectives, 2007, 21 (2), 195-214

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Related works:
Journal Article: How Wages Change: Micro Evidence from the International Wage Flexibility Project (2007)
Working Paper: How wages change: micro evidence from the international wage flexibility project (2007)
Working Paper: How Wages Change: Micro Evidence from the International Wage Flexibility Project (2007)
Working Paper: How wages change: micro evidence from the International Wage Flexibility Project (2006)
Working Paper: How wages change: micro evidence from the International Wage Flexibility Project (2006)
Working Paper: How wages change: micro evidence from the International Wage Flexibility Project (2006)
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