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Title:How Rigid are Nominal Wages? Evidence and Implications for Germany PDF Logo
Authors:Knoppik, Christoph
Beissinger, Thomas
Issue Date:2001
Series/Report no.:IZA Discussion paper series 357
Abstract:Many of the recent attempts to find evidence of downward nominal wage rigidity in micro data have suffered from a number of problems, including composition bias and the effects of measurement error. In order to avoid these problems we explicitly model the determinants of wage changes and the measurement process that leads to observable earnings changes, thereby directly tackling the question of whether and to which extent downward nominal wage rigidity exists in German micro data. We find a high degree of downward nominal wage rigidity, which for rates of inflation lower than three percent is shown to lead to higher equilibrium unemployment via the generated real wage wedge.
Subjects:Downward nominal wage rigidity
inflation target
unemployment
Germany
JEL:J30
E24
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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