How Wages Change: Micro Evidence from the International Wage Flexibility Project

Dickens, William T.; Göette, Lorenz; Groshen, Erica L.; Holden, Steinar; Messina, Julián; Schweitzer, Mark E.; Turunen, Jarkko; Ward-Warmedinger, Melanie E.

doi:10.2139/ssrn.1688941

Cited by 68 publications

(84 citation statements)

References 62 publications

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“…Strong unions are likely to have the bargaining power to ensure compensation for inflation, and they are empirically associated with higher DRWR across OECD countries (Dickens et al 2007;Holden and Wulfsberg 2009). In Uruguay, unionization weakened dramatically during the sample period.…”

Section: ) Messina and Sanz-de-galdeano: Wage Rigidity And Disinflamentioning

confidence: 99%

“…This is a natural assumption in the context of DNWR, and worker resistance to nominal wage cuts is well grounded in theory. 16 The empirical literature studying real rigidity has also concentrated on asymmetric (downward) frictions (Dickens et al 2007). However, real wage rigidity, and in particular wage indexation of the type observed in Brazil in the first years of disinflation, may well be symmetric.…”

Section: B Real Wage Rigidity: Downward or Symmetric?mentioning

confidence: 99%

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Wage Rigidity and Disinflation in Emerging Countries

Messina¹,

Sanz-de-Galdeano²

2011

Policy Research Working Papers

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Section: ) Messina and Sanz-de-galdeano: Wage Rigidity And Disinflamentioning

confidence: 99%

Section: B Real Wage Rigidity: Downward or Symmetric?mentioning

confidence: 99%

Wage Rigidity and Disinflation in Emerging Countries

Messina¹,

Sanz-de-Galdeano²

2011

Policy Research Working Papers

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“…Again the coefficient of the dummy variable turns out significantly positive thereby contradicting other studies pointing to a flattening of the Phillips curve based on linear models. Apart from possible structural breaks affecting the data, the overall looser fit for both the UK and Germany could be due to the varying degree of downward rigidity of nominal wages itself, as highlighted by Dickens et al (2007).…”

Section: Estimation Results From European Datamentioning

confidence: 99%

“…within the literature. Particularly, the International Wage Flexibility Project concludes that the degree of downward rigidity of nominal wages in the US is high compared to other advanced economies (Dickens et al, 2007), which might be explained by behavioral factors. 4 But such a feature of the economy has important implications for monetary policy as it opens up the possibility of a long-run trade-off between inflation and unemployment, as has already been suggested by Tobin (1972) and elaborated in detail by Akerlof et al (1996).…”

Section: The Phillips Curve Inflation Dynamics and Downward Rigiditmentioning

confidence: 99%

Fixing the Phillips Curve: The Case of Downward Nominal Wage Rigidity in the Us

Reitz

Slopek

2013

Int. J. Fin. Econ.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Whereas microeconomic studies point to pronounced downward rigidity of nominal wages in the US economy, the standard Phillips curve neglects such a feature. Using a stochastic frontier model we find macroeconomic evidence of a strictly nonnegative error in an otherwise standard Phillips curve in post-war data on the US nonfinancial corporate sector. This error depends on growth in the profit ratio, output, and trend productivity, which should all determine the flexibility of wage adjustments. As the error usually surges during an economic downturn, the empirical model suggests that the downward pressure on inflation arising from higher unemployment in a standard Phillips curve framework is significantly cushioned. This might help to understand the robustness of inflation especially in the most recent past. In general, the cyclical dynamics of inflation appear to be more complex than captured by a conventional Phillips curve. Terms of use: Documents in AbstractWhereas microeconomic studies point to pronounced downward rigidity of nominal wages in the US economy, the standard Phillips curve neglects such a feature. Using a stochastic frontier model we find macroeconomic evidence of a strictly nonnegative error in an otherwise standard Phillips curve in post-war data on the US nonfinancial corporate sector. This error depends on growth in the profit ratio, output, and trend productivity, which should all determine the flexibility of wage adjustments. As the error usually surges during an economic downturn, the empirical model suggests that the downward pressure on inflation arising from higher unemployment in a standard Phillips curve framework is significantly cushioned. This might help to understand the robustness of inflation especially in the most recent past. In general, the cyclical dynamics of inflation appear to be more complex than captured by a conventional Phillips curve.

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“…One of the most notable recent evidence on DNWR is the comprehensive work of the International Wage Flexibility Project (IWFP), reviewed in Dickens et al(2007aDickens et al( , 2007b. Their findings indicate asymmetry in the distribution of nominal wage changes in 16 OECD countries, with the U.S. being among the countries with very high degrees of DNWR.…”

Section: Introductionmentioning

confidence: 99%

Optimal monetary policy and downward nominal wage rigidity in frictional labor markets

Abo-Zaid

2013

Journal of Economic Dynamics and Control

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Recent empirical evidence suggests that nominal wages in the U.S. are downwardly rigid. This paper studies optimal monetary policy in a labor search and matching framework under the presence of Downward Nominal Wage Rigidity (DNWR). The study shows that when nominal wages are downwardly rigid, optimal monetary policy targets a positive inflation rate; the annual long-run inflation rate is around 2 percent. Positive inflation in this environment "greases the wheels" of the labor market by facilitating real wage adjustments, and hence it eases job creation and prevents excessive increase in unemployment. In addition, there is an asymmetry in the response of the economy to positive and negative productivity shocks, particularly those of large sizes. Finally, the optimal long-run inflation rate predicted by this study is considerably higher than in otherwise neoclassical labor markets, suggesting that the nature of the labor market in which DNWR is studied can matter for policy recommendations.

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How Wages Change: Micro Evidence from the International Wage Flexibility Project

Cited by 68 publications

References 62 publications

Wage Rigidity and Disinflation in Emerging Countries

Wage Rigidity and Disinflation in Emerging Countries

Fixing the Phillips Curve: The Case of Downward Nominal Wage Rigidity in the Us

Optimal monetary policy and downward nominal wage rigidity in frictional labor markets

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