Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms

27 Pages Posted: 19 Dec 2010

See all articles by Jan Babeck

Jan Babeck

affiliation not provided to SSRN

Philip Du Caju

National Bank of Belgium

Theodora Kosma

Bank of Greece

Martina Lawless

Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department

Julin Messina

affiliation not provided to SSRN

Date Written: November 15, 2010

Abstract

We present new evidence from a unique survey of firms across Europe on downward wage rigidity in both real and nominal terms. Our results indicate that wage rigidities are related to workforce composition in a manner that is consistent with related theoretical models. We also find that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations.

Keywords: Wage indexation, wage rigidity, survey data, European Union, J30, J31, J32, C81, P5

Suggested Citation

Babeck, Jan and Du Caju, Philip and Kosma, Theodora and Lawless, Martina and Messina, Julin, Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms (November 15, 2010). Scandinavian Journal of Economics, Vol. 112, Issue 4, pp. 884-910, 2010, Available at SSRN: https://ssrn.com/abstract=1727889 or http://dx.doi.org/10.1111/j.1467-9442.2010.01624.x

Jan Babeck (Contact Author)

affiliation not provided to SSRN

No Address Available

Philip Du Caju

National Bank of Belgium ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

Theodora Kosma

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

Martina Lawless

Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department ( email )

Dame Street
P.O. Box 559
Dublin 2
Ireland

Julin Messina

affiliation not provided to SSRN

No Address Available

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