- 11 October 2017
- WORKING PAPER SERIES - No. 2103Details
- 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. These data are particularly useful for this paper given the 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 following a decrease in demand is significantly smaller than the rise in the probability of an upward wage response associated with an increase in demand. Estimation results point to a negative effect of downward wage rigidities on employment at the firm level.
- JEL Code
- J23 : Labor and Demographic Economics→Demand and Supply of Labor→Labor Demand
J30 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→General
- Wage dynamics network