Inflation and Wage Expectations of Firms and Employees

Lukas Buchheim, Sebastian Link and Sascha Möhrle

No 17269, IZA Discussion Papers from IZA Network @ LISER

Abstract: We study the link between expected inflation and wages using novel panel data from German firms and employees. We find that pass-through—the percentage point change in wage growth given a one percentage point change in expected inflation—is small: 0.11–0.17 for firms and 0.03–0.07 for employees. Utilizing variation in the coverage length of collective agreements, we estimate that passthrough at the intensive margin is 1.4-2 times larger than average pass-through, highlighting the importance of wage rigidities for pass-through. Pass-through also rises with the bargaining power of employees. At the extensive margin, expected inflation has little effect on additional wage negotiations.

Keywords: wage expectations; inflation; pass-through; wage-price spirals; bargaining; firms; employees; survey data (search for similar items in EconPapers)
JEL-codes: D84 E24 E31 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2024-09
New Economics Papers: this item is included in nep-eec, nep-ipr, nep-lma and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Working Paper: Inflation and Wage Expectations of Firms and Employees (2024)
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