Wage Rigidity,Inflation, and Institutions |
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| Authors: | Steinar Holden Fredrik Wulfsberg |
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| Institution: | 1. University of Oslo, , NO‐0317 Oslo, NorwayAlso affiliated with Norges Bank, CESifo, and the Centre of Equality, Social Organization, and Performance (ESOP) at the Department of Economics at the University of Oslo. ESOP is supported by the Research Council of Norway through its Centres of Excellence funding scheme, project number 179552.;2. Norges Bank, , NO‐0107 Oslo, Norway |
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| Abstract: | We study the possible existence of downward nominal wage rigidity (DNWR) at wage growth rates different from zero in aggregate data. Even if DNWR prevails at zero for individual workers, compositional effects might lead to falling aggregate wages, while changes in relative wages combined with DNWR might lead to positive aggregate wage growth. We explore industry data for 19 OECD countries, over the 1971–2006 period. We find evidence for a floor on nominal wage growth at 6 percent in the 1970s and 1980s, at 1 percent in the 1990s, and at 0.5 percent in the 2000s. Furthermore, we find that DNWR is stronger in country‐years with strict employment protection legislation, high union density, centralized wage setting, and high inflation. |
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| Keywords: | Downward nominal wage rigidity OECD wage inflation wage setting C14 C15 E31 J3 J5 |
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