Nominal and real wage rigidity: Does nationality matter?

Abstract

We assess the differences in downward nominal and real wage rigidity between natives and immigrants in Portugal, using a matched employer-employee database and the International Wage Flexibility Project (IWFP) methodology. This methodology estimates a notional or counterfactual distribution that would prevail under wage flexibility and compares it to the empirical wage distribution. The estimated measures of wage rigidity capture the share of workers that received a wage freeze but would receive a wage cut in the absence of rigidity. We found that the differences between natives and immigrants are not substantial, but immigrants are more prone to institutional-related rigidities.

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

“…The U.S. economy in 1987 shows high nominal rigidity, with n ϭ 54 percent, but no apparent real rigidity, with r ϭ Ϫ3 percent. 10 Finland's whitecollar employees in 1988 show low nominal rigidity at n ϭ 18 percent, but high real rigidity at r ϭ 99 percent. The United Kingdom in 1984 shows fairly high nominal and real rigidity, with n ϭ 28 percent and r ϭ 30 percent.…”