How Wages Change: Micro Evidence from the International Wage Flexibility Project
Journal of Economic Perspectives, Vol 21, No. 2., 2007
29 Pages Posted: 30 Nov 2020
Date Written: October 9, 2007
Workers’ wages are not set in a spot market. Instead, the wages of most workers — at least those who do not switch jobs — typically change only annually and are mediated by a complex set of institutions and factors such as contracts, unions, standards of fairness, minimum wage policy, transfers of risk, and incomplete information. The goal of the International Wage Flexibility Project (IWFP) — a consortium of over 40 researchers with access to individual workers’ earnings data for 16 countries — is to provide new microeconomic evidence on how wages change for continuing workers. Wage changes due to worker mobility are governed by different processes and are beyond the scope of this study.
Keywords: Real and nominal wage flexibility, wages
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