Downward Wage Rigidity for Different Workers and Firms: An Evaluation for Belgium Using the IWFP Procedure

National Bank of Belgium Working Paper No. 124

50 Pages Posted: 3 Oct 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: December 21, 2007

Abstract

This paper evaluates the extent of downward nominal and real wage rigidity for different categories of workers and firms using the methodology recently developed by the International Wage Flexibility Project (Dickens and Goette, 2006). The analysis is based on an administrative data set on individual earnings, covering one-third of employees of the private sector in Belgium over the period 1990-2002. Our results show that Belgium is characterised by strong real wage rigidity and very low nominal wage rigidity, consistent with the Belgian wage formation system of full indexation. Real rigidity is stronger for white-collar workers than for blue-collar workers. Real rigidity decreases with age and wage level. Wage rigidity appears to be lower in firms experiencing downturns. Finally, smaller firms and firms with lower job quit rates appear to have more rigid wages. Our results are robust to alternative measures of rigidity.

Keywords: wage rigidity, matched employer-employee data

JEL Classification: J31

Suggested Citation

Du Caju, Philip and Fuss, Catherine and Wintr, Ladislav, Downward Wage Rigidity for Different Workers and Firms: An Evaluation for Belgium Using the IWFP Procedure (December 21, 2007). National Bank of Belgium Working Paper No. 124. Available at SSRN: https://ssrn.com/abstract=1685847 or http://dx.doi.org/10.2139/ssrn.1685847

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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