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Nominal wage rigidity and the rate of inflation

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  • Stephen Nickell
  • Glenda Quintini

Abstract

Using the accurate and extensive data available in the UK New Earnings Survey, this paper investigates the extent to which nominal wages are downwardly rigid and whether such rigidity interferes with necessary real wage adjustments when inflation is low. Despite the substantial numbers of individuals whose nominal wages fall from one year to the next, we find that there is evidence of some rigidity at zero nominal wage change. While the effect is statistically significant, the macroeconomic impact of the distortion is very modest. Copyright 2003 Royal Economic Society.

Suggested Citation

  • Stephen Nickell & Glenda Quintini, 2003. "Nominal wage rigidity and the rate of inflation," Economic Journal, Royal Economic Society, vol. 113(490), pages 762-781, October.
    • Handle: RePEc:ecj:econjl:v:113:y:2003:i:490:p:762-781
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    References listed on IDEAS

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    1. F Green & Steven McIntosh, 2000. "Working on the Chain Gang? An Examination of Rising Effort Levels in Europe in the 1990s," CEP Discussion Papers dp0465, Centre for Economic Performance, LSE.
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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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