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Do Sticky Wages Matter? New Evidence from Matched Firm Survey and Register Data

Anne Kathrin Funk and Daniel Kaufmann ()

Economica, 2022, vol. 89, issue 355, 689-712

Abstract: We study the causal effects of downward nominal wage rigidity after a deflationary monetary policy shock using Swiss data on employee‐level contractual wages matched with income and employment from social security register data. We exploit the discontinuity around the origin of the wage growth distribution to compare the outcomes of individuals with wage freezes (treatment group) and small wage cuts (control group) before and after an unexpected decision by the Swiss National Bank leading to a 1% decline of the price level. Locally (that is, near the origin of the wage growth distribution), downward nominal wage rigidities cause a 4.4% decline in income and a 0.7 percentage point increase in the probability of unemployment. In the aggregate, income declines by 0.3% and the probability of unemployment increases by 0.05 percentage points.

Date: 2022
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https://doi.org/10.1111/ecca.12412

Related works:
Working Paper: Do Sticky Wages Matter? New Evidence from Matched Firm-Survey and Register Data (2020) Downloads
Working Paper: Do sticky wages matter? New evidence from matched firm-survey and register data (2020) Downloads
Working Paper: Do Sticky Wages Matter? New Evidence from Matched Firm-Survey and Register Data (2020) Downloads
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