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Wage Flexibility in Turbulent Times: A Practitioner's Guide, with an Application to Poland

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  • Shintaro Yamaguchi

Abstract

This paper reviews several methods to measure wage flexibility, and their suitability for evaluating the extent of such flexibility during times of structural change, when wage distributions and wage curves can be particularly volatile. The paper uses nonparametric estimation to capture possible nonlinearities in the wage curve and relaxes the assumption of a stable wage distribution over time by linking the shape of the wage change distribution to macroeconomic variables. The proposed methodology is applied to Polish micro data. The estimates confirm that wages are less elastic in a high-unemployment/lowwage environment. Based on a comparison of actual and counterfactual wage distributions, the effects of nominal wage rigidities on real wages, and thus, on the labor market and the real economy, were limited until 1998, but have been quite significant thereafter.

Suggested Citation

  • Shintaro Yamaguchi, 2008. "Wage Flexibility in Turbulent Times: A Practitioner's Guide, with an Application to Poland," Eastern European Economics, Taylor & Francis Journals, vol. 46(2), pages 88-114, March.
    • Handle: RePEc:mes:eaeuec:v:46:y:2008:i:2:p:88-114
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    Cited by:

    1. Brzoza-Brzezina, Michal & Socha, Jacek, 2006. "Downward nominal wage rigidity in Poland," MPRA Paper 843, University Library of Munich, Germany, revised Nov 2006.
    2. Baltagi, Badi H. & Rokicki, Bartlomiej, 2014. "The spatial Polish wage curve with gender effects: Evidence from the Polish Labor Survey," Regional Science and Urban Economics, Elsevier, vol. 49(C), pages 36-47.

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