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Downward Nominal Wage Rigidity: Evidence from the Employment Cost Index

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Author Info
David Lebow (Federal Reserve Board)
Raven Saks (Harvard University)
Beth Anne Wilson (Federal Reserve Board)
Abstract

We examine the extent of downward nominal wage rigidity using the microdata underlying the BLS's employment cost index. This dataset has two significant advantages over those used previously. It is an extensive, nationally representative dataset based on establishment records and is thus free from much of the reporting error that has plagued earlier work. Even more important, the data are unique in containing detailed information on benefit costs, allowing a first look at the rigidity of total compensation (that is, wages plus benefits). In general, we find significantly stronger evidence of downward nominal wage rigidity than did studies using panel data on individuals. Although total compensation appears somewhat more flexible than wages and salaries alone, we still find a significant amount of rigidity for compensation. Furthermore, the greater flexibility of compensation does not seem to reflect the deliberate attempt by firms to use benefits to circumvent wage and salary rigidity.

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Publisher Info
Article provided by Berkeley Electronic Press in its journal Advances in Macroeconomics.

Volume (Year): 3 (2003)
Issue (Month): 1 ()
Pages: 1117-1117
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Related research
Keywords: nominal wage rigidity benefits inflation

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Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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  8. Seamus Hogan, 1998. "What Does Downward Nominal-Wage Rigidity Imply for Monetary Policy?," Canadian Public Policy, University of Toronto Press, vol. 24(4), pages 513-525, December. [Downloadable!] (restricted)
    Other versions:
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Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Steinar Holden & Fredrik Wulfsberg, 2004. "Downward Nominal Wage Rigidity in Europe," Working Paper 2004/5, Norges Bank. [Downloadable!]
    Other versions:
  2. Knoppik, Christoph, 2007. "Skewness and location of distributions of wage change rates in the presence of downward nominal wage rigidity," Regensburger Diskussionsbeiträge zur Wirtschaftswissenschaft 420, University of Regensburg, Department of Economics. [Downloadable!]
  3. Kuroda, Sachiko & Yamamoto, Isamu, 2005. "Wage Fluctuations in Japan after the Bursting of the Bubble Economy: Downward Nominal Wage Rigidity, Payroll, and the Unemployment Rate," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 23(2), pages 1-29, May. [Downloadable!]
  4. Shin-Ichi Nishiyama, 2009. "Monetary Policy Lag, Zero Lower Bound, and Inflation Targeting," Working Papers 09-2, Bank of Canada. [Downloadable!]
  5. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julian Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie Ward, 2006. "The interaction of labor markets and inflation: analysis of micro data from the International Wage Flexibility Project," Proceedings, Federal Reserve Bank of San Francisco. [Downloadable!]
  6. Christoph Knoppik & Thomas Beissinger, 2009. "Downward nominal wage rigidity in Europe: an analysis of European micro data from the ECHP 1994–2001," Empirical Economics, Springer, vol. 36(2), pages 321-338, May. [Downloadable!] (restricted)
    Other versions:
  7. Pierpaolo Benigno & Luca Antonio Ricci, 2009. "The Inflation-Unemployment Trade-off at Low Inflation," IMF Working Papers 09/34, International Monetary Fund. [Downloadable!]
    Other versions:
  8. Brzoza-Brzezina, Michal & Socha, Jacek, 2006. "Downward nominal wage rigidity in Poland," MPRA Paper 843, University Library of Munich, Germany, revised Nov 2006. [Downloadable!]
  9. William T. Dickens & Lorenz Goette & Erica L. Groshen & Steinar Holden & Julián Messina & Mark E. Schweitzer & Jarkko Turunen & Melanie E. Ward, 2006. "How Wages Change: Micro Evidence from the International Wage Flexibility Project," IZA Discussion Papers 2487, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  10. Helge Holden & Lars Holden & Steinar Holden, 2005. "Contract Adjustment under Uncertainty," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
  11. Steinar Holden, 2004. "Wage formation under low inflation," Working Paper 2004/14, Norges Bank. [Downloadable!]
    Other versions:
  12. Steinar Holden & Fredrik Wulfsberg, 2007. "How strong is the case for downward real wage rigidity?," Working Papers 07-6, Federal Reserve Bank of Boston. [Downloadable!]
  13. Peter Thompson & Mihaela Pintea, 2007. "Sorting, Selection, and Industry Shakeouts," Working Papers 0702, Florida International University, Department of Economics. [Downloadable!]
    Other versions:
  14. Lorenz Goette & David Huffman, 2005. "Do Emotions Improve Labor Market Outcomes?," IZA Discussion Papers 1895, Institute for the Study of Labor (IZA). [Downloadable!]
  15. Holden, Helge & Holden, Lars & Holden, Steinar, 2004. "Contract Renewal," Memorandum 20/2004, Oslo University, Department of Economics. [Downloadable!]
  16. Holden, Steinar & Wulfsberg, Fredrik, 2005. "Downward Nominal Wage Rigidity in the OECD," Memorandum 10/2005, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
  17. Holden, Steinar & Wulfsberg, Fredrik, 2007. "Are real wages rigid downwards?," Memorandum 07/2007, Oslo University, Department of Economics. [Downloadable!]
    Other versions:
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