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Title:Does downward nominal wage rigidity dampen wage increases? PDF Logo
Authors:Stüber, Heiko
Beissinger, Thomas
Issue Date:2010
Series/Report no.:FZID discussion papers 22-2010
Abstract:Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets.
Subjects:Downward Nominal Wage Rigidity
Wage Stickiness
Wage Compression
Unconditional Quantile Regression
JEL:E24
E31
J31
Persistent Identifier of the first edition:urn:nbn:de:bsz:100-opus-5144
Document Type:Working Paper
Appears in Collections:FZID Discussion Papers, Universität Hohenheim

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