Downward Nominal Rigidity in West German Earnings, 1975-95

Abstract

If downward nominal wage rigidity exists, it should affect the distribution of earnings changes. We present a common analytical framework for three distinct and previously unconnected approaches to the analysis of downward nominal rigidity, the skewness-location approach, the symmetry approach and the histogram-location approach. We modify them by dropping the assumption of time-invariant rigidity and apply them to earnings data from the IAB-Beschftigtenstichprobe (IABS). We find that the distribution of West German log earnings changes is indeed affected by downward nominal rigidity. Our modification of the approaches also allows us to find that the degree of nominal rigidity depends on business cycle conditions, with weaker rigidity in times of rising unemployment. Our findings support the critics of very low inflation targets. Copyright Verein fü Socialpolitik and Blackwell Publishers Ltd 2001.

Downward nominal wage rigidity in Europe: an analysis of European micro data from the ECHP 1994–2001

“…A number of variants of the basic proportional model of the histogram-location approach have been proposed in Kahn (1997), Beissinger and Knoppik (2001), Christofides and Leung (2003), and Castellanos, García-Verdú and Kaplan (2004), but none of these is suitable for cross-country, cross-sectional, or cross-regional analysis with a necessity to deal with potential differences in dispersion as illustrated above.…”

Transatlantic Differences in Labour Markets: Changes in Wage and Non-Employment Structures in the 1980s and the 1990s

“…However, it is the fact that the U.S. and Britain experienced significantly larger increases in wage inequality than Germany, especially in the 1980s when hourly wage inequality in Germany seems to have fallen as Figure 2 shows, which evoked wage rigidity explanations for rising continental European unemployment and made the Krugman hypothesis so widely accepted. 4 Estimates of structural models of nominal and/or real wage rigidities in Germany are provided in Beissinger and Knoppik (2001), Bauer, Bonin and Sunde (2003), Fehr, Götte and Pfeiffer (2003), and Cornelißen and Hübler (2005), for example. 5 Reform proposals of the Tomlinson report are available on http://www.dfes.…”

Wage Rigidity in Canadian Collective Bargaining Agreements

“…One of the controversies surrounding survey data is the extent to which recall, measurement, rounding and timing errors my exist. 6 These concerns apply to a far lesser extent to the contract data because of the regulatory environment under which this information is collected. In addition, the Canadian data is available over a long period of time which includes periods of high inflation, a period of substantially reduced inflation, as well a period during which inflation was exceptionally low and much lower than in the US.…”

“…Information 5 For instance, McLaughlin (1999a, p. 129) finds that '... the skewness of union workers' wage changes is all atributable to nominal rigidity'. 6 For the significance of these issues for the size of the spike at zero in the context of British data, see Smith (1999).…”