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Asymmetric wage adjustment and employment in European firms

Petra Marotzke, Robert Anderton, Ana Bairrao, Clémence Berson () and Peter Tóth ()

No 2103, Working Paper Series from European Central Bank

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. JEL Classification: J23, J30

Keywords: demand shocks; employment; wage rigidity (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cta and nep-eur
Date: 2017-10
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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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