Nominal Wage Rigidity in Australia

Jacqueline Dwyer and Kenneth Leong
Additional contact information
Jacqueline Dwyer: Reserve Bank of Australia
Kenneth Leong: Reserve Bank of Australia

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: The existence of downward nominal price and wage rigidity has been used to argue against the adoption of zero inflation targets. A good deal is known about the nature and extent of price flexibility in Australia. However, little is known about nominal wage flexibility since investigations have been hindered by a lack of suitable data. Using a unique and unpublished microdata set, we find strong evidence of downward nominal wage rigidity. The idea that firms are able to circumvent wage rigidity by varying broader forms of remuneration is not supported by our study. We find that these broad measures are still skewed away from pay cuts, though to a lesser extent than wages. Not all of the observed rigidity is binding, though, since skewness away from wage cuts appears to occur for reasons other than downward wage rigidity. However, the extent of rigidity we do observe lends support to the pursuit of small positive rates of inflation as an objective of monetary policy.

Keywords: nominal wage rigidity; skewness away from wage cuts (search for similar items in EconPapers)
JEL-codes: E24 (search for similar items in EconPapers)
Date: 2000-11
References: Add references at CitEc
Citations: View citations in EconPapers (18)

Downloads: (external link)
https://www.rba.gov.au/publications/rdp/2000/pdf/rdp2000-08.pdf (application/pdf)

Related works:
Journal Article: Nominal Wage Rigidity in Australia (2003)
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:rba:rbardp:rdp2000-08

Access Statistics for this paper

More papers in RBA Research Discussion Papers from Reserve Bank of Australia Contact information at EDIRC.
Bibliographic data for series maintained by Paula Drew ().