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Wage adjustment and employment in Europe

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  • Petra Marotzke
  • Robert Anderton
  • Ana Bairrao
  • Clémence Berson
  • Peter Tóth

Abstract

We explore the impact of wage adjustment on employment with a focus on the role of downward nominal wage rigidities. We use a harmonised survey dataset, which covers 25 European countries in the period 2010-2013. The main advantages of the data are firm-level information on the change in economic conditions and collective pay agreements. Our findings confirm the presence of wage rigidities in Europe: first, collective pay agreements reduce the probability of downward wage adjustment; second, the rise in the probability of downward base wage responses to a decrease in demand is significantly smaller than the rise in the probability of an upward wage response to an increase in demand. Estimation results point to a negative effect of downward wage rigidities on employment at the firm level.

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  • Petra Marotzke & Robert Anderton & Ana Bairrao & Clémence Berson & Peter Tóth, 2016. "Wage adjustment and employment in Europe," Discussion Papers 2016-19, University of Nottingham, GEP.
    • Handle: RePEc:not:notgep:16/19
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    3. Marotzke Petra & Anderton Robert & Bairrao Ana & Berson Clémence & Tóth Peter, 2020. "Asymmetric wage adjustment and employment in European firms," The B.E. Journal of Macroeconomics, De Gruyter, vol. 20(2), pages 1-25, June.
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    5. L. Ferrara & G. Gauthier & F. Pappadà, 2017. "Fiscal consolidation episodes in OECD countries: the role of tax compliance and fiscal space," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 45, pages 15-22, Spring.
    6. C. Berson & C. Malgouyres & S. Ray, 2017. "The labour market: institutions and reforms Summary of the third Labour Market Conference held in Aix-en-Provence on 1 and 2 December 2016 by the Aix-Marseille School of Economics and the Banque de Fr," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 45, pages 45-52, Spring.
    7. Brand, Claus & Obstbaum, Meri & Coenen, Günter & Sondermann, David & Lydon, Reamonn & Ajevskis, Viktors & Hammermann, Felix & Angino, Siria & Hernborg, Nils & Basso, Henrique & Hertweck, Matthias & Bi, 2021. "Employment and the conduct of monetary policy in the euro area," Occasional Paper Series 275, European Central Bank.
    8. C. Devillers & K. Parra Ramirez, 2017. "French Banks confirm their fourth rank in international banking," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 45, pages 31-44, Spring.
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    11. Lehner, Lukas & Ramskogler, Paul & Riedl, Aleksandra, 2022. "Begging thy coworker – Labor market dualization and the slow-down of wage growth in Europe," INET Oxford Working Papers 2022-04, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
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    13. Mario Izquierdo & Juan Francisco Jimeno & Theodora Kosma & Ana Lamo & Stephen Millard & Tairi Rõõm & Eliana Viviano, 2017. "Labour market adjustment in Europe during the crisis: microeconomic evidence from the Wage Dynamics Network survey," Occasional Papers 1704, Banco de España.
    14. Fernando Martins & Jan Babecký, 2018. "Flexible wage components as a source of wage adaptability to shocks:evidence from European firms, 2010–2013," Working Papers w201808, Banco de Portugal, Economics and Research Department.
    15. repec:bfr:quarte:2016:45:02 is not listed on IDEAS
    16. A. Lalliard, 2017. "An alternative method for capturing tensions in the residential property market," Quarterly selection of articles - Bulletin de la Banque de France, Banque de France, issue 45, pages 5-13, Spring.
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    More about this item

    Keywords

    Wage rigidity; Employment; Demand shocks;
    All these keywords.

    JEL classification:

    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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