Downward Nominal Wage Rigidity in Europe

36 Pages Posted: 7 May 2004

See all articles by Steinar Holden

Steinar Holden

University of Oslo - Department of Economics; Norges Bank; CESifo (Center for Economic Studies and Ifo Institute)

Fredrik Wulfsberg

Oslo Business School; Oslo Business School

Date Written: April 2004


This paper explores the existence of downward nominal wage rigidity (DNWR) in the industry sectors of 14 European countries, over the period 1973-1999, using a data set of hourly nominal wages at industry level. Based on a novel nonparametric statistical method, which allows for country and year-specific variation in both the median and the dispersion of industry wage changes, we reject the hypothesis of no DNWR. The fraction of wage cuts prevented due to DNWR has fallen over time, from 70 percent in the 1970s to 20 percent in the 1990s, but the number of industries affected by DNWR has increased. Wage cuts are less likely in countries and years with high inflation, low unemployment, high union density and strict employment protection legislation.

Keywords: downward nominal wage rigidity, European countries, employment protection legislation

JEL Classification: J5, C14, C15, E31

Suggested Citation

Holden, Steinar and Wulfsberg, Fredrik and Wulfsberg, Fredrik, Downward Nominal Wage Rigidity in Europe (April 2004). Available at SSRN: or

Steinar Holden (Contact Author)

University of Oslo - Department of Economics ( email )

P.O. Box 1095 Blindern
N-0317 Oslo
+47 22 85 51 56 (Phone)
+47 22 85 50 35 (Fax)


Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679


Fredrik Wulfsberg

Oslo Business School ( email )

Pilestredet 35
Oslo, 0557

Oslo Business School ( email )

P.O. Box 4
Oslo, 0130
48401711 (Phone)
0861 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics