The Extent of Downward Nominal Wage Rigidity: New Evidence from Payroll Data

Daniel Schaefer and Carl Singleton
Additional contact information
Daniel Schaefer: Johannes Kepler University Linz
Authors registered in the RePEc Author Service: Daniel Schäfer

Review of Economic Dynamics, 2023, vol. 51, 60-76

Abstract: We use over a decade of representative payroll data from Great Britain to study the nominal wage changes of employees who stayed in the same job for at least one year. We show that basic hourly pay drives the cyclicality of marginal labour costs, making this the most relevant measure of wages for macroeconomic models that incorporate wage rigidity. Basic hourly pay adjusts much less frequently than previously thought in Britain, particularly in small firms. We find that firms compress wage growth when inflation is low, which indicates that downward rigidity constrains firms' wage setting. We demonstrate that the empirical extent of downward nominal wage rigidity (DNWR) can theoretically cause considerable long-run output losses. Combined, our results all point to the importance of including DNWR in macroeconomic and monetary policy models. (Copyright: Elsevier)

Keywords: Downward nominal wage rigidity; Unemployment fluctuations; Macroeconomic policy; Marginal labour costs (search for similar items in EconPapers)
JEL-codes: E24 E32 J31 J33 (search for similar items in EconPapers)
Date: 2023
References: Add references at CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://dx.doi.org/10.1016/j.red.2022.11.006
None

Related works:
Software Item: Code and data files for "The Extent of Downward Nominal Wage Rigidity: New Evidence from Payroll Data" (2022)
Working Paper: The Extent of Downward Nominal Wage Rigidity: New Evidence from Payroll Data (2022)
Working Paper: Online Appendix to "The Extent of Downward Nominal Wage Rigidity: New Evidence from Payroll Data" (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:red:issued:22-104

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/j.red.2022.11.006

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().