Asymmetric Wage Adjustment and Employment in European Firms

AbstractWe 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, wage responses to demand developments are asymmetric with a weaker downward response. Estimation results show that a wage reduction significantly lowers the probability of a decrease in employment at the firm level when demand falls and thereby point to a negative effect of downward wage rigidities on employment at the firm level.

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Asymmetric wage adjustment and employment in European firms

Marotzke

Anderton

Bairrao

et al. 2020

The B.E. Journal of Macroeconomics

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Asymmetric Wage Adjustment and Employment in European Firms

Abstract: The views and results presented in this paper are those of the authors and do not necessarily represent the official opinion of the National Bank of Slovakia.All rights reserved.

Cited by 1 publication

References 8 publications