Are Real Wages Rigid Downwards?

45 Pages Posted: 22 May 2007

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: May 2007

Abstract

This paper explores the existence of downward real wage rigidity (DRWR) in 19 OECD countries, over the period 1973-1999, using data for hourly nominal earnings at industry level. Based on a nonparametric statistical method, which allows for country and year specific variation in both the median and the dispersion of industry wage changes, we find evidence of some downward rigidity of real wages in OECD countries overall, as well as for regions and time periods. There is some evidence that real wage cuts are less prevalent under strict employment protection legislation and high union density. Generally, we find stronger evidence for downward nominal than for downward real wage rigidity.

Keywords: downward real wage rigidity, OECD, employment protection legislation, wage setting

JEL Classification: J3, J5, C14, C15, E31

Suggested Citation

Holden, Steinar and Wulfsberg, Fredrik and Wulfsberg, Fredrik, Are Real Wages Rigid Downwards? (May 2007). CESifo Working Paper Series No. 1983, Available at SSRN: https://ssrn.com/abstract=988024 or http://dx.doi.org/10.2139/ssrn.988024

Steinar Holden (Contact Author)

University of Oslo - Department of Economics ( email )

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HOME PAGE: http://folk.uio.no/~sholden/

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CESifo (Center for Economic Studies and Ifo Institute)

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Fredrik Wulfsberg

Oslo Business School ( email )

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Norway

Oslo Business School ( email )

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