Time-dependent or state-dependent wage-setting? Evidence from periods of macroeconomic instability

Jósef Sigurdsson and Rannveig Sigurdardottir

Journal of Monetary Economics, 2016, vol. 78, issue C, 50-66

Abstract: Administrative data on monthly wages in Iceland during 1998–2010 provide new insight into nominal wage rigidity. Unlike the data used in previous work, ours have a higher frequency, minimal measurement error, and a long sample including a period of substantial macroeconomic instability. We find that the monthly frequency of nominal wage changes is 13 percent. Although nominal wage cuts are rare, their frequency rises following a large macroeconomic shock. Timing of wage changes is both time-dependent and state-dependent: we find evidence of synchronization of adjustment and contracts of fixed duration, but also that inflation and unemployment over the wage spell affect the timing of adjustment.

Keywords: Wage rigidity; Wage setting; Microdata evidence (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (43)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:78:y:2016:i:c:p:50-66

DOI: 10.1016/j.jmoneco.2016.01.001

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