How Strong is the Case for Downward Real Wage Rigidity?

42 Pages Posted: 23 Jul 2007

See all articles by Steinar Holden

Steinar Holden

University of Oslo - Department of Economics; Norges Bank; CESifo (Center for Economic Studies and Ifo Institute)

Fredrik Wulfsberg

Oslo Business School; Oslo Business School

Date Written: June 27, 2007

Abstract

This paper explores the existence of downward real wage rigidity (DRWR) in 19 OECD countries, over the period 1973-1999, using data for hourly nominal earnings at the industry level. Based on a nonparametric statistical method, which allows for country- and year-specific variation in both the median and the dispersion of industry wage changes, we find evidence of some DRWR in OECD countries overall, as well as for specific geographical regions and time periods. There is some evidence that real wage cuts are less prevalent in countries with strict employment protection legislation and high union density. Generally, we find stronger evidence for downward nominal wage rigidity than for downward real wage rigidity.

JEL Classification: J3, J5, C14, C15, E31

Suggested Citation

Holden, Steinar and Wulfsberg, Fredrik and Wulfsberg, Fredrik, How Strong is the Case for Downward Real Wage Rigidity? (June 27, 2007). FRB of Boston Working Paper No. 07-6, Available at SSRN: https://ssrn.com/abstract=1002387 or http://dx.doi.org/10.2139/ssrn.1002387

Steinar Holden

University of Oslo - Department of Economics ( email )

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HOME PAGE: http://folk.uio.no/~sholden/

Norges Bank ( email )

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CESifo (Center for Economic Studies and Ifo Institute)

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Fredrik Wulfsberg (Contact Author)

Oslo Business School ( email )

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Norway

Oslo Business School ( email )

P.O. Box 4
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Norway
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