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Asymmetric wage adjustment and employment in European firms

Petra Marotzke, R. Anderton, A. Bairrao, Clémence Berson () and Peter Tóth ()

Working papers from Banque de France

Abstract: We explore the impact of wage adjustment on employment with a focus on the role of downward nominal wage rigidities. We use a harmonised survey dataset, which covers 25 European countries in the period 2010-2013. These data are particularly useful for this paper given the firm-level information on the change in economic conditions and collective pay agreements. Our findings confirm the presence of wage rigidities in Europe: first, collective pay agreements reduce the probability of downward wage adjustment; second, the rise in the probability of downward base wage responses following a decrease in demand is significantly smaller than the rise in the probability of an upward wage response associated with an increase in demand. Estimation results point to a negative effect of downward wage rigidities on employment at the firm level.

Keywords: Wage rigidity; Employment; Demand shocks. (search for similar items in EconPapers)
JEL-codes: J23 J30 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eur
Date: 2017
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Related works:
Working Paper: Asymmetric wage adjustment and employment in European firms (2017) Downloads
Working Paper: Asymmetric wage adjustment and employment in European firms (2017) Downloads
Working Paper: Wage adjustment and employment in Europe (2016) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:640

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