Survey on Wage and Price Formation of Czech Firms

Jan Babecký, Kamil Dybczak and Kamil Galuscak

Working Papers from Czech National Bank, Research and Statistics Department

Abstract: Using an ad-hoc survey at the firm level, we investigate the determinants of wage and price-setting practices in Czech firms, the presence and sources of wage rigidity, and reactions of firms to hypothetical shocks. Although the evidence of downward wage rigidity is not widespread, we find particular relevance of efficiency wage models for wage rigidity, while implicit contract theory is relevant in firms employing mainly highskilled labour. The survey further suggests that prices are less rigid than wages, while the link between wage and price changes is weak. As a response to unanticipated shocks such as a demand drop, an increase in the cost of an intermediate input or a wage increase, firms mainly reduce costs by reducing non-labour costs and temporary employment.

Keywords: Downward wage rigidity; price setting; survey data; wage setting. (search for similar items in EconPapers)
JEL-codes: C83 J31 J41 L11 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-lab
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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