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Downward Nominal Wage Rigidity in Europe

Author

Listed:
  • Steinar Holden

    (Department of Economics, University of Oslo and Norges Bank)

  • Fredrik Wulfsberg

    (Norges Bank)

Abstract

This paper explores the existence of downward nominal wage rigidity (DNWR) in the industry sectors of 14 European countries, over the period 1973–1999, using a data set of hourly nominal wages at industry level. Based on a novel nonparametric statistical method, which allows for country and year specific variation in both the median and the dispersion of industry wage changes, we reject the hypothesis of no DNWR. The fraction of wage cuts prevented due to DNWR has fallen over time, from 70 percent in the 1970s to 20 percent in the 1990s, but the number of industries affected by DNWR has increased. Wage cuts are less likely in countries and years with high inflation, low unemployment, high union density and strict employment protection legislation.

Suggested Citation

  • Steinar Holden & Fredrik Wulfsberg, 2004. "Downward Nominal Wage Rigidity in Europe," Working Paper 2004/5, Norges Bank.
    • Handle: RePEc:bno:worpap:2004_05
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    References listed on IDEAS

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    More about this item

    Keywords

    Downward nominal wage rigidity; European countries; employment protection legislation;
    All these keywords.

    JEL classification:

    • J4 - Labor and Demographic Economics - - Particular Labor Markets
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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