Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Micro Data

Thomas Bauer (), Holger Bonin () and Uwe Sunde

No 959, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: The paper examines real and nominal wage rigidities. We estimate a switching regime model, in which the observed distribution of individual wage changes, computed from West German register data for 1976-1997, is generated by simultaneous processes of real, nominal or no wage rigidity, and measurement error. The fraction of workers facing wage increases that are due to nominal, but mostly real wage rigidity is substantial. The extent of real rigidity rises with inflation, whereas the opposite holds for nominal rigidity. Overall, the incidence of wage rigidity, which accelerates unemployment growth, is most likely minimized in an environment with moderate inflation.

Keywords: West Germany; collective bargaining; real effects of inflation; downward wage rigidity; switching regime model (search for similar items in EconPapers)
JEL-codes: E52 J31 J51 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2003-12
New Economics Papers: this item is included in nep-eec, nep-lab, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (61)

Published - revised version published in: Economic Journal, 2007, 117, 508-529

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Related works:
Journal Article: Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Micro Data (2007)
Working Paper: Real and nominal wage rigidities and the rate of inflation: Evidence from West German micro data (2007)
Working Paper: Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Microdata (2004)
Working Paper: Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Micro Data (2004)
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