Some Evidence on the Importance of Sticky Wages

Alessandro Barattieri, Susanto Basu and Peter Gottschalk

No 5039, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Nominal wage stickiness is an important component of recent medium-scale structural macroeconomic models, but to date there has been little microeconomic evidence supporting the assumption of sluggish nominal wage adjustment. We present evidence on the frequency of nominal wage adjustment using data from the Survey of Income and Program Participation (SIPP) for the period 1996-1999. The SIPP provides high-frequency information on wages, employment and demographic characteristics for a large and representative sample of the US population. The main results of the analysis are as follows. 1) After correcting for measurement error, wages appear to be very sticky. In the average quarter, the probability that an individual will experience a nominal wage change is between 5 and 18 percent, depending on the samples and assumptions used. 2) The frequency of wage adjustment does not display significant seasonal patterns. 3) There is little heterogeneity in the frequency of wage adjustment across industries and occupations 4) The hazard of a nominal wage change first increases and then decreases, with a peak at 12 months. 5) The probability of a wage change is positively correlated with the unemployment rate and with the consumer price inflation rate.

Keywords: measurement error; micro-level evidence; wage stickiness (search for similar items in EconPapers)
JEL-codes: E24 E32 J30 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2010-06
New Economics Papers: this item is included in nep-cba, nep-lab and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (65)

Published - published in: American Economic Journal: Macroeconomics, 2014, 6 (1), 70-101

Downloads: (external link)
https://docs.iza.org/dp5039.pdf (application/pdf)

Related works:
Journal Article: Some Evidence on the Importance of Sticky Wages (2014)
Working Paper: Some Evidence on the Importance of Sticky Wages (2010)
Working Paper: Some evidence on the importance of sticky wages (2010)
Working Paper: Some Evidence on the Importance of Sticky Wages (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:iza:izadps:dp5039

Ordering information: This working paper can be ordered from
IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany

Access Statistics for this paper

More papers in IZA Discussion Papers from Institute of Labor Economics (IZA) IZA, P.O. Box 7240, D-53072 Bonn, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Holger Hinte ().