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Identifying the determinants of downward wage rigidity: some methodological considerations and new empirical evidence

Carlos Marques (), Fernando Martins () and Daniel Dias ()

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: This paper discusses the identification of the determinants of downward wage rigidity and provides new empirical evidence concerning its importance in Europe. It is shown that the models estimated so far in the literature suffer from econometric problems that prevent the contributions of those determinants to be correctly identified or precisely estimated. An empirical exercise, along the lines discussed in this paper, using survey data for 15 European Union countries, shows that the results may significantly differ from the ones previously obtained in the literature. Together, the theoretical considerations and the estimated results suggest that new empirical evidence is required before definite conclusions on the determinants of downward nominal or real wage rigidity can be drawn.

JEL-codes: C35 J31 J50 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eec and nep-eur
Date: 2012
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