Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/144463
Authors: 
Du Caju, Philip
Kosma, Theodora
Lawless, Martina
Messina, Julián
Rõõm, Tairi
Year of Publication: 
2013
Series/Report no.: 
Working Paper Research 251
Abstract: 
The rarity with which firms reduce nominal wages has been frequently observed, even in the face of considerable negative economic shocks. This paper uses a unique survey of fourteen European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why they avoid cutting wages. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in euro area countries but were one of the lowest ranked obstacles in non-euro area countries. The paper examines how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations put forward for the infrequency of wage cuts.
Subjects: 
labour costs
wage rigidity
firm survey
wage cuts
European Union
JEL: 
J30
J32
J33
J51
C81
P5
Document Type: 
Working Paper

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