Downward Nominal Wage Rigidity in Services: Direct Evidence from a Firm Survey

10 Pages Posted: 19 Jan 2009

See all articles by Daniel Radowski

Daniel Radowski

Deutsche Bundesbank

Holger Bonin

IZA Institute of Labor Economics; ZEW – Leibniz Centre for European Economic Research

Abstract

The paper uses a new German employer survey on wage setting practices to analyze incidence and sources of nominal wage rigidity in services vs. manufacturing. We observe that wage freezes are significantly more frequent and wage cuts less frequent in services. Reasons preventing wage cuts reported by employers suggest that fear of excess worker turnover could explain this distinct behavior.

Keywords: nominal wage rigidity, efficiency wages, manufacturing and services, Germany

JEL Classification: J31

Suggested Citation

Radowski, Daniel and Bonin, Holger, Downward Nominal Wage Rigidity in Services: Direct Evidence from a Firm Survey. IZA Discussion Paper No. 3923, Available at SSRN: https://ssrn.com/abstract=1329561

Daniel Radowski (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Holger Bonin

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 3894 303 (Phone)
+49 228 3894 510 (Fax)

ZEW – Leibniz Centre for European Economic Research

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D-68034 Mannheim, 68034
Germany

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