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Sticky Wages in a Developing Country: Lessons from Structured Interviews in Pakistan

Ali Choudhary (), Saima Mahmood, Sajawal Khan (), Waqas Ahmed and Gylfi Zoega
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Saima Mahmood: State Bank of Pakistan

Authors registered in the RePEc Author Service: Saima Naeem

No 213, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: We contribute to the growing literature on the empirical evidence for wage rigidity using structured interviews for Pakistan. The novelty of the study consists of using data from a developing country which provides the basis for a comparison with studies performed in the developed countries. Our sample of 1189 managers finds widespread support for downward nominal wage rigidity while real wage rigidity is less pronounced although still present. Concerns about the adverse effects of wage reductions on effort, morale, the most productive workers leaving (adverse selection) and the minimum-wage largely explain the presence of nominal wage rigidity. All sectors, irrespective of time, take minimum-wage changes into account when setting wages so that the law very much sets wage expectations.

JEL-codes: E5 F4 O1 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2013-03
New Economics Papers: this item is included in nep-mac
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Working Paper: Stick Wages in a Developing Country: Lessons from Structured Interviews in Pakistan (2013) Downloads
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