Beyond the spike at zero: Understanding nominal wage rigidity through empirical and model-based approaches

Yoon Joo Jo

Journal of International Economics, 2025, vol. 157, issue C

Abstract: I examine the cyclical properties of nominal wage change distributions across time and US states using nationally representative household surveys from 1979 to 2018. The novel finding is that the share of workers with no wage changes, which accounts for the large spike at zero in the nominal wage change distribution, is more countercyclical than the share of workers with wage cuts. I analyze heterogeneous agent models with six alternative wage-setting schemes and conclude that the model with downward nominal wage rigidity is the most consistent with empirical findings regarding the shape and cyclicality of wage change distributions.

Keywords: Downward nominal wage rigidity; Nominal wage change distribution; Wage stickiness; Business cycle (search for similar items in EconPapers)
JEL-codes: E24 E32 J30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:157:y:2025:i:c:s002219962500073x

DOI: 10.1016/j.jinteco.2025.104117

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