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ResearchPaper
2010

Does downward nominal wage rigidity dampen wage increases?

Abstract (English)

Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets.

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Notes

Publication license

Publication series

FZID discussion papers; 22

Published in

Faculty
Faculty of Business, Economics and Social Sciences
State Institutes
Institute
Institut für Volkswirtschaftslehre (bis 2010)
Forschungszentrum Innovation und Dienstleistung

Examination date

Supervisor

Edition / version

Citation

DOI

ISSN

ISBN

Language
English

Publisher

Publisher place

Classification (DDC)
330 Economics

Original object

Standardized keywords (GND)

Sustainable Development Goals

BibTeX

@techreport{Beißinger2010, url = {https://hohpublica.uni-hohenheim.de/handle/123456789/5397}, author = {Beißinger, Thomas and Stüber, Heiko}, title = {Does downward nominal wage rigidity dampen wage increases?}, year = {2010}, school = {Universität Hohenheim}, series = {FZID discussion papers}, }
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