Downward Nominal Wage Rigidity in the OECD

46 Pages Posted: 3 Sep 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

Multiple version iconThere are 2 versions of this paper

Date Written: July 2007

Abstract

Recent micro studies have documented extensive downward nominal wage rigidity (DNWR) for job stayers in many OECD countries, but the effect on aggregate variables remains disputed. Using data for hourly nominal wages, we explore the existence of DNWR on wages at the industry level in 19 OECD countries, over the period 1973-1999. Based on a novel method, we reject the hypothesis of no DNWR. The fraction of wage cuts prevented due to DNWR has fallen over time, from 61 percent in the 1970s to 16 percent in the late 1990s, but the number of industries affected by DNWR has increased. DNWR is more prevalent when unemployment is low, union density is high, and employment protection legislation is strict.

Keywords: Downward nominal wage rigidity, oecd, employment protection legislation, wage setting

JEL Classification: E3, J3, J5

Suggested Citation

Holden, Steinar and Wulfsberg, Fredrik and Wulfsberg, Fredrik, Downward Nominal Wage Rigidity in the OECD (July 2007). ECB Working Paper No. 777, Available at SSRN: https://ssrn.com/abstract=999521 or http://dx.doi.org/10.2139/ssrn.999521

Steinar Holden (Contact Author)

University of Oslo - Department of Economics ( email )

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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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