Sticky Wages: Evidence from Quarterly Microeconomic Data

56 Pages Posted: 20 May 2008

See all articles by Thomas Heckel

Thomas Heckel

BNP Paribas Asset Management

Hervé le Bihan

Banque de France - Centre de Recherche

Jeremi Montornes

Banque de France

Date Written: May 2008

Abstract

This paper documents nominal wage stickiness using an original quarterly firm-level dataset. We use the ACEMO survey, which reports the base wage for up to 12 employee categories in French firms over the period 1998 to 2005, and obtain the following main results. First, the quarterly frequency of wage change is around 35 percent. Second, there is some down-ward rigidity in the base wage. Third, wage changes are mainly synchronized within firms but to a large extent staggered across firms. Fourth, standard Calvo or Taylor schemes fail to match micro wage adjustment patterns, but fixed duration 'Taylor-like' wage contracts are observed for a minority of firms. Based on a two-thresholds sample selection model, we perform an econometric analysis of wage changes. Our results suggest that the timing of wage adjustments is not state-dependent, and are consistent with existence of predetermined of wage changes. They also suggest that both backward- and forward-looking behavior is relevant in wage setting.

Keywords: Wage stickiness, wage predetermination

JEL Classification: E24, J3

Suggested Citation

Heckel, Thomas and Le Bihan, Herve and Montornes, Jeremi, Sticky Wages: Evidence from Quarterly Microeconomic Data (May 2008). ECB Working Paper No. 893, Available at SSRN: https://ssrn.com/abstract=1120746 or http://dx.doi.org/10.2139/ssrn.1120746

Thomas Heckel (Contact Author)

BNP Paribas Asset Management ( email )

Paris
France

Herve Le Bihan

Banque de France - Centre de Recherche ( email )

31 rue Croix des Petits Champs
Room 41-1391
75049 Paris Cedex 01
France

Jeremi Montornes

Banque de France ( email )

DGEI 41-1430
75049 Paris Cedex 01
Paris, 75049
France

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