Downward Nominal Wage Rigidity in Italy: Evidence and Consequences

Francesco Devicienti ()

No 20, LABORatorio R. Revelli Working Papers Series from LABORatorio R. Revelli, Centre for Employment Studies

Abstract: This paper uses administrative longitudinal micro-data from the Italian Social Security Institute (INPS) to estimate the extent of downward nominal wage rigidity. The determinants of wage changes are explicitly modelled, as is the measurement error deriving from the fact that earnings inclusive of benefits, not hourly wages, are available in the data. Estimates show that the degree of downward nominal wage rigidity is medium/high – between 51% and 68% of all notional wage cuts being prevented by the existence of proportional rigidity. The implications of the estimated nominal wage rigidity for the real side of the economy are also explored.

Keywords: Nominal wage rigidity; measurement error; proportional and threshold rigidity models; natural unemployment rate. (search for similar items in EconPapers)
JEL-codes: E24 E31 J31 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2002
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Citations: View citations in EconPapers (11)

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Persistent link: https://EconPapers.repec.org/RePEc:cca:wplabo:20

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