Real and Nominal Wage Adjustment in Open Economies

Some Evidence on the Importance of Sticky Wages

American Economic Journal Macroeconomics ◽

10.1257/mac.6.1.70 ◽

2014 ◽

Vol 6 (1) ◽

pp. 70-101 ◽

Cited By ~ 50

Author(s):

Alessandro Barattieri ◽

Susanto Basu ◽

Peter Gottschalk

Keyword(s):

Measurement Error ◽

Representative Sample ◽

Nominal Wage ◽

Seasonal Patterns ◽

Wage Change ◽

Present Evidence ◽

The Us ◽

Sipp Data ◽

Wage Adjustment ◽

Sticky Wages

We present evidence on the frequency of nominal wage adjustment using SIPP data adjusted for measurement error. The SIPP is a representative sample of the US population. Our main results are: (i) The average quarterly probability of a nominal wage change is between 21.1 and 26.6 percent, depending on the assumptions used. (ii) Wage changes are much more likely when workers change jobs. (iii) The frequency of wage adjustment does not display significant seasonal patterns. (iv) The hazard of a nominal wage change first increases and then decreases, with a peak at 12 months. (JEL E24, E32, E52, J31)

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Nominal Wage Adjustment, Demand Shortage And Economic Policy

SSRN Electronic Journal ◽

10.2139/ssrn.1506722 ◽

2009 ◽

Cited By ~ 3

Author(s):

Yoshiyasu Ono ◽

Junichiro Ishida ◽

ISER and Economic Research

Keyword(s):

Economic Policy ◽

Nominal Wage ◽

Wage Adjustment

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Asymmetric wage adjustment and employment in European firms

The B E Journal of Macroeconomics ◽

10.1515/bejm-2018-0254 ◽

2020 ◽

Vol 20 (2) ◽

Author(s):

Petra Marotzke ◽

Robert Anderton ◽

Ana Bairrao ◽

Clémence Berson ◽

Peter Tóth

Keyword(s):

European Countries ◽

Economic Conditions ◽

Nominal Wage ◽

Firm Level ◽

Level Information ◽

Negative Effect ◽

Wage Adjustment ◽

The Impact

AbstractWe explore the impact of wage adjustment on employment with a focus on the role of downward nominal wage rigidities. We use a harmonised survey dataset, which covers 25 European countries in the period 2010–2013. These data are particularly useful for this paper given the firm-level information on the change in economic conditions and collective pay agreements. Our findings confirm the presence of wage rigidities in Europe: first, collective pay agreements reduce the probability of downward wage adjustment; second, wage responses to demand developments are asymmetric with a weaker downward response. Estimation results show that a wage reduction significantly lowers the probability of a decrease in employment at the firm level when demand falls and thereby point to a negative effect of downward wage rigidities on employment at the firm level.

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The Negative Mean Output Gap

IMF Working Papers ◽

10.5089/9781513511740.001 ◽

2019 ◽

Vol 19 (183) ◽

Author(s):

Shekhar Aiyar ◽

Simon Voigts

Keyword(s):

Adjustment Costs ◽

New Keynesian ◽

Wage Rigidity ◽

Estimation Methods ◽

Output Gap ◽

Nominal Wage ◽

Systematic Bias ◽

Keynesian Model ◽

Wage Adjustment ◽

Nominal Wage Rigidity

We argue that in an economy with downward nominal wage rigidity, the output gap is negative on average. Because it is more difficult to cut wages than to increase them, firms reduce employment more during downturns than they increase employment during expansions. This is demonstrated in a simple New Keynesian model with asymmetric wage adjustment costs. Using the model's output gap as a benchmark, we further show that common output gap estimation methods exhibit a systematic bias because they assume a zero mean. The bias is especially large in deep recessions when potential output tends to be most severely underestimated.

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