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A statistical-mathematical procedure to estimate the output effect of wage rigidities

Author

Listed:
  • Rosa Ferrentino

    (University of Salerno)

  • Luca Vota

    (University of Salerno)

Abstract

In this manuscript, a contribution to the extensive literature on the equilibrium effects of labour market frictions, with particular reference to employment and wages, is provided by the authors. More precisely, a new empirical method to assess the output impact of nominal rigidities in the labour market (wage rigidities) is proposed by them. The authors’ procedure is theoretically based, in the sense that it can be drawn from the few assumptions of the standard neoclassical model of economic growth. An application of their method is provided by the authors by carrying out an appropriate regression analysis through annual panel data on the twenty Italian regions in the sample period 1995–2020. The interest in these territorial units stems from the fact that the Italian labour market is affected by substantial nominal rigidities because of its centralized bargaining system, which sets wages without considering the presence of large local differences in labour productivity. It is found by the authors that the negative output impact of wage rigidities significantly varies across macro-areas (Northern and Central-Southern regions), especially when human capital is considered.

Suggested Citation

  • Rosa Ferrentino & Luca Vota, 2024. "A statistical-mathematical procedure to estimate the output effect of wage rigidities," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(4), pages 4003-4028, August.
    • Handle: RePEc:spr:qualqt:v:58:y:2024:i:4:d:10.1007_s11135-023-01803-8
    DOI: 10.1007/s11135-023-01803-8
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    Keywords

    Wage rigidities; Output impact of wage rigidities; Mathematical methods in economics;
    All these keywords.

    JEL classification:

    • C02 - Mathematical and Quantitative Methods - - General - - - Mathematical Economics
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • P16 - Political Economy and Comparative Economic Systems - - Capitalist Economies - - - Capitalist Institutions; Welfare State
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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