Does downward nominal wage rigidity dampen wage increases?

Heiko Stüber and Thomas Beissinger ()

No 22-2010, FZID Discussion Papers from University of Hohenheim, Center for Research on Innovation and Services (FZID)

Abstract: Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets.

Keywords: Downward Nominal Wage Rigidity; Wage Stickiness; Wage Compression; Unconditional Quantile Regression (search for similar items in EconPapers)
JEL-codes: E24 E31 J31 (search for similar items in EconPapers)
Date: 2010
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/44971/1/643789618.pdf (application/pdf)

Related works:
Journal Article: Does downward nominal wage rigidity dampen wage increases? (2012)
Working Paper: Does downward nominal wage rigidity dampen wage increases? (2010)
Working Paper: Does Downward Nominal Wage Rigidity Dampen Wage Increases? (2010)
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:zbw:fziddp:222010

Access Statistics for this paper

More papers in FZID Discussion Papers from University of Hohenheim, Center for Research on Innovation and Services (FZID) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().