Flexible wage components as a source of wage adaptability to shocks:evidence from European firms, 2010–2013

Fernando Martins and Jan Babecký
Authors registered in the RePEc Author Service: Paweł Strzelecki, Clémence Berson, Ludmila Fadejeva and Petra Marotzke

Working Papers from Banco de Portugal, Economics and Research Department

Abstract: This paper provides evidence on the role of flexible wage components as a channel for firms to adjust costs in case of the adverse shocks. It uses data from a firm-level survey for 25 European countries that covers the period 2010–2013. We find that firms subject to nominal wage rigidities, which prevent them from adjusting base wages, are more likely to cut flexible wage components in order to adjust labour costs when needed. Thus firms use flexible wage components as a buffer to overcome base wage rigidity. More generally, when base wages are able to adjust to negative shocks, the flexible wage components also react and their reaction is stronger than that of base wages.

JEL-codes: C81 J30 J32 P5 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-eec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.bportugal.pt/sites/default/files/anexos/papers/wp201808_0.pdf

Related works:
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:ptu:wpaper:w201808

Access Statistics for this paper

More papers in Working Papers from Banco de Portugal, Economics and Research Department Contact information at EDIRC.
Bibliographic data for series maintained by DEE-NTD ().