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Downward nominal and real wage rigidity :survey evidence from European firms

Author

Listed:
  • Jan Babecky
  • Philip Du Caju
  • Theodora Kosma
  • Martina Lawless
  • Julian Messina
  • Tairi Room

Abstract

Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. We broaden the analysis beyond downward rigidity in base wages by investigating the use of other margins of labour cost adjustment at the firm level. Using data from a unique survey, we find that firms make frequent use of other, more flexible, components of compensation to adjust the cost of labour. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. We also show how the margins of adjustment chosen are affected by firm and worker characteristics

Suggested Citation

  • Jan Babecky & Philip Du Caju & Theodora Kosma & Martina Lawless & Julian Messina & Tairi Room, 2009. "Downward nominal and real wage rigidity :survey evidence from European firms," Bank of Estonia Working Papers 2009-3, Bank of Estonia, revised 06 Dec 2009.
    • Handle: RePEc:eea:boewps:wp2009-03
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    More about this item

    Keywords

    labour costs; wage rigidity; firm survey; European Union;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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