Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms

27 Pages Posted: 16 Nov 2010

See all articles by Jan Babecký

Jan Babecký

Czech National Bank (CNB)

Philip Du Caju

National Bank of Belgium

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

Abstract

We present new evidence from a unique survey of firms across Europe on downward wage rigidity in both real and nominal terms. Our results indicate that wage rigidities are related to workforce composition in a manner that is consistent with related theoretical models. We also find that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations.

Suggested Citation

Babecky, Jan and Du Caju, Philip and Kosma, Theodora and Lawless, Martina and Messina, Julián and Rõõm, Tairi, Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms. Scandinavian Journal of Economics, Vol. 112, Issue 4, pp. 884-910, December 2010. Available at SSRN: https://ssrn.com/abstract=1709725 or http://dx.doi.org/10.1111/j.1467-9442.2010.01624.x

Jan Babecky (Contact Author)

Czech National Bank (CNB) ( email )

Na Prikope 28
CZ-11503 Praha 1
Czech Republic

Philip Du Caju

National Bank of Belgium ( email )

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

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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