Modelling Downward and Upward Wage Flexibility at the Macroeconomic Level

26 Pages Posted: 2 May 2013

See all articles by Antonia López-Villavicencio

Antonia López-Villavicencio

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN)

Sophie Saglio

University Paris 8

Date Written: April 9, 2013

Abstract

In this paper, we analyze wage sensitivity to labour market disequilibrium at a macroeconomic level in several OECD countries. We estimate the Phillips curve and a wage equation with an error correction term à la Sargan with a novel asymmetric approach that allows us to distinguish between downward and upward flexibility. We present evidence that downward wage flexibility is more important than upward flexibility in all the countries. We also show that flexible labor market institutions do not lead to higher downward wage flexibility and lower unemployment. However, higher employment protection.

Keywords: wage flexibility, asymmetries, European Union

JEL Classification: C32, E24, J30

Suggested Citation

López-Villavicencio, Antonia and Saglio, Sophie, Modelling Downward and Upward Wage Flexibility at the Macroeconomic Level (April 9, 2013). Available at SSRN: https://ssrn.com/abstract=2259002 or http://dx.doi.org/10.2139/ssrn.2259002

Antonia López-Villavicencio (Contact Author)

University of Angers - Centre d'économie de l'Université de Paris Nord (CEPN) ( email )

UMR7115
Université Paris-Nord
Paris XIII
France

Sophie Saglio

University Paris 8 ( email )

2 rue de la Liberté
Paris, 93526
France

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