The Margins of Labour Cost Adjustment: Survey Evidence from European Firms

Martina Lawless, Jan Babecký, Philip Du Caju, Theodora Kosma, Julian Messina and Tairi Room

No 12/RT/09, Research Technical Papers from Central Bank of Ireland

Abstract: Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. We broaden the analysis beyond downward rigidity in base wages by investigating the use of other margins of labour cost adjustment at the firm level. Using data from a unique survey, we find that firms make frequent use of other, more flexible, components of compensation to adjust the cost of labour. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. We also show how the margins of adjustment chosen are affected by firm and worker characteristics.

Pages: 35 pages
Date: 2009-11
New Economics Papers: this item is included in nep-lab
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Related works:
Working Paper: The Margins of Labour Cost Adjustment: Survey Evidence from European Firms (2010)
Working Paper: The margins of labour cost adjustment: survey evidence from european firms (2009)
Working Paper: The margins of labour cost adjustment: survey evidence from European firms (2009)
Working Paper: The margins of labour cost adjustment: Survey evidence from European firms (2009)
Working Paper: The margins of labor cost adjustment: survey evidence from European firms (2009)
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