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Downward Nominal Wage Rigidity in the OECD
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Steinar Holden
Published/Copyright:
April 11, 2008
Recent microeconomic studies have documented extensive downward nominal wage rigidity (DNWR) for job stayers in many OECD countries, but critics argue that the effect might be undone by compositional changes and flexibility in wages of new entrants. Using data for hourly nominal wages at industry level, we explore the existence of DNWR on industry wages in 19 OECD countries, over the period 1973-1999. We propose a novel method to detect DNWR. We reject the hypothesis of no DNWR in the overall sample. The fraction of wage cuts prevented due to DNWR has fallen over time, from 61 percent in the 1970s to 16 percent in the late 1990s, but the number of industries affected by DNWR has increased. DNWR is more prevalent when unemployment is low and union density is high. Strict employment protection legislation also leads to fewer wage cuts.
Published Online: 2008-4-11
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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Keywords for this article
downward nominal wage rigidity;
OECD;
employment protection legislation;
wage setting
Articles in the same Issue
- Topics Article
- The Importance of Industrial Policy in Quality-Ladder Growth Models
- The Evolution of International Output Differences (1970-2000): From Factors to Productivity
- Non-Linearities and Unit Roots in G7 Macroeconomic Variables
- Mitigating the Growth-Effects of Inflation through Financial Development
- The Dynamics of European Inflation Expectations
- Target Saving in an Overlapping Generations Model
- Inequality, Volatility and Labour Market Efficiency
- Expected Equity Returns and the Demand for Money
- Forecasting with DSGE Models: The Role of Nonlinearities
- Job Reallocation, Unemployment and Hours in a New Keynesian Model
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- Determinants of Bilateral Remittance Flows
- Cyclical Behavior of Unemployment and Job Vacancies: A Comparison between Canada and the United States
- Economic and Socio-Political Determinants of de Facto Monetary Institutions and Inflationary Outcomes
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- Convergence by Parts
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- Great Moderation(s) and US Interest Rates: Unconditional Evidence
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- Monetary Policy under Downward Nominal Wage Rigidity
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