Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153481
Authors: 
Knell, Markus
Stiglbauer, Alfred
Year of Publication: 
2009
Series/Report no.: 
ECB Working Paper 1047
Abstract: 
In this paper we present an extension of the Taylor model with staggered wages in which wage-setting is also influenced by reference norms (i.e. by benchmark wages). We show that reference norms can considerably increase the persistence of inflation and the extent of real wage rigidity but that these effects depend on the definition of reference norms (e.g. how backward-looking they are) and on whether the importance of norms differs between sectors. Using data on collectively bargained wages in Austria from 1980 to 2006 we show that wage-setting is strongly influenced by reference norms, that the wages of other sectors seem to matter more than own past wages and that there is a clear indication for the existence of wage leader-ship (i.e. asymmetries in reference norms).
Subjects: 
Inflation persistence
Real Wage Rigidity
staggered contracts
Wage Leadership
JEL: 
E31
E32
E24
J51
Document Type: 
Working Paper

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