Understanding Sectoral Differences in Downward Real Wage Rigidity: Workforce Composition, Institutions, Technology and Competition

National Bank of Belgium Working Paper No. 156

43 Pages Posted: 28 Sep 2010

See all articles by Philip Du Caju

Philip Du Caju

National Bank of Belgium

Catherine Fuss

National Bank of Belgium

Ladislav Wintr

Banque Centrale du Luxembourg

Multiple version iconThere are 2 versions of this paper

Date Written: February 19, 2009

Abstract

This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, competition, technology and wage-bargaining institutions. We adopt the measure of downward real wage rigidity (DRWR) developed by Dickens and Goette (2006) and rely on a large administrative matched employer-employee dataset for Belgium over the period 1990-2002. Firstly, our results indicate that DRWR is significantly higher for white-collar workers and lower for older workers and for workers with higher earnings and bonuses. Secondly, beyond labour force composition effects, sectoral differences in DRWR are related to competition, firm size, technology and wage-bargaining institutions. We find that wages are more rigid in more competitive sectors, in labour-intensive sectors, and in sectors with predominant centralised wagesetting at the sector level as opposed to firm-level wage agreements.

Keywords: Wage Rigidity, Matched Employer-Employee Data, Wage-Bargaining Institutions

JEL Classification: J31

Suggested Citation

Du Caju, Philip and Fuss, Catherine and Wintr, Ladislav, Understanding Sectoral Differences in Downward Real Wage Rigidity: Workforce Composition, Institutions, Technology and Competition (February 19, 2009). National Bank of Belgium Working Paper No. 156. Available at SSRN: https://ssrn.com/abstract=1684104 or http://dx.doi.org/10.2139/ssrn.1684104

Philip Du Caju (Contact Author)

National Bank of Belgium ( email )

Research Department
Boulevard de Berlaimont 14
B-1000 Brussels, 1000
Belgium

Catherine Fuss

National Bank of Belgium ( email )

Brussels, B-1000
Belgium

Ladislav Wintr

Banque Centrale du Luxembourg ( email )

2, boulevard Royal
Luxembourg, L-2983
Luxembourg

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