The Margins of Labor Cost Adjustment: Survey Evidence from European Firms

36 Pages Posted: 20 Apr 2016

See all articles by Jan Babecký

Jan Babecký

Czech National Bank (CNB)

Philip Du Caju

affiliation not provided to SSRN

Theodora Kosma

Bank of Greece

Martina Lawless

Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department

Julian Messina

World Bank

Tairi Rõõm

Bank of Estonia

Date Written: December 1, 2009

Abstract

Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. This paper broadens the analysis beyond downward rigidity in base wages by investigating the use of other margins of labor cost adjustment at the firm level. Using data from a unique survey, the authors find that firms make frequent use of other, more flexible, components of compensation to adjust the cost of labor. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. The paper also shows how the margins of adjustment chosen are affected by firm and worker characteristics.

Keywords: Labor Markets, Labor Policies, Environmental Economics & Policies, Microfinance, Economic Theory & Research

Suggested Citation

Babecky, Jan and Caju, Philip Du and Kosma, Theodora and Lawless, Martina and Messina, Julián and Rõõm, Tairi, The Margins of Labor Cost Adjustment: Survey Evidence from European Firms (December 1, 2009). World Bank Policy Research Working Paper Series, Vol. , pp. -, 2009. Available at SSRN: https://ssrn.com/abstract=1533678

Jan Babecky (Contact Author)

Czech National Bank (CNB) ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

Philip Du Caju

affiliation not provided to SSRN

No Address Available

Theodora Kosma

Bank of Greece ( email )

21 E. Venizelos Avenue
GR 102 50 Athens
Greece

Martina Lawless

Central Bank and Financial Services Authority of Ireland - Economic Analysis and Research Department ( email )

Dame Street
P.O. Box 559
Dublin 2
Ireland

Julián Messina

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Tairi Rõõm

Bank of Estonia ( email )

Estonia Building 13
15095 Tallinn
Estonia

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