How Do Firms Adjust Their Wage Bill in Belgium ? A Decomposition Along the Intensive and Extensive Margins

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. In 2008 all ECB publications feature a motif taken from the €10 banknote. Terms of use: Documents in HOW DO FIRMS ADJUST THEIR WAGE BILL IN BELGIUM?A Wage Dynamics NetworkThis paper contains research conducted within the Wage Dynamics Network (WDN). The WDN is a research network consisting of economists from the European Central Bank (ECB) and the national central banks (NCBs) of the EU countries. The WDN aims at studying in depth the features and sources of wage and labour cost dynamics and their implications for monetary policy. The specific objectives of the network are: i) identifying the sources and features of wage and labour cost dynamics that are most relevant for monetary policy and ii) clarifying the relationship between wages, labour costs and prices both at the firm and macro-economic level.The WDN is chaired by Frank Smets (ECB). Giuseppe Bertola (Università di Torino) and Julian Messina (Universitat de Girona) act as external consultants and Ana Lamo (ECB) as Secretary.The refereeing process of this paper has been co-ordinated by a team composed of Gabriel Fagan (ECB, chairperson), Philip Vermeulen (ECB), Giuseppe Bertola, Julian Messina, Jan Babecký (CNB), Hervé Le Bihan (Banque de France) and Thomas Mathä (Banque centrale du Luxembourg).The paper is released in order to make the results of WDN research generally available, in preliminary form, to encourage comments and suggestions prior to final publication. The views expressed in the paper are the author's own and do not necessarily reflect those of the ESCB. ECB Working Paper Series No 854January 2008 Abstract 4

Branchenspezifische Unterschiede in der Abwärtsreallohnstarrheit: Arbeitskraftstruktur, Institutionen, Technologie und Wettbewerb

“…Our results contrast with the findings of Campbell (1991), who reports a negative correlation between sector-level wage flexibility and the capital-labour ratio in the US. But they are consistent with the finding in Fuss (2009) that, in Belgium, wage cuts in adverse times are largely non-existent in the construction sector (the most labour-intensive) contrary to the manufacturing and services sectors. Also, our finding that wage rigidity is stronger in labour-intensive sectors complements the view that the higher degree of price stickiness observed in more labourintensive sectors might result from wage rigidity, see Altissimo et al (2006), Álvarez et al (2006), Dhyne et al (2006) and Vermeulen et al (2007).…”

Rigid Labour Compensation and Flexible Employment ? Firm-Level Evidence with Regard to Productivity for Belgium

“…Few recent papers look at these questions at the microeconomic level. Duhautois and Kramarz (2006) and Fuss (2008) examine the relative importance of average wage and employment flows in wage bill adjustment but do not estimate the elasticity of labour compensation and employment.…”

“…However, our estimates do not provide a test or a measure of real wage rigidity. There is no theoretical reference value for the average labour compensation elasticity and labour elasticity under the 14 See Fuss (2008) for evidence that variations in hours per worker and the number of days worked are significantly lower in cases of falling sales and wage bill contractions. 15 For comparison, Bertola et al (2008) report that on average over 15 European countries, around 30% of firms declare that they reduce employment, 11% of the firms reduce pay, and up to 7% cut working time.…”

What is the most flexible component of wage bill adjustment? Evidence from Belgium

“…When sales declines persist, firms may find it necessary or more relevant to reduce their own labour force. However, as shown, in a previous version of the paper (Fuss, 2008), most of employment adjustment is contemporaneous to the sales declines. So sales declines may induce a mix of a smaller reduction in the number of …”

“…14 Robustness with respect to alternative trimming of the sample and definition of the favourable vs. adverse times are shown in a previous version of the paper (Fuss, 2008). Each component of the wage bill decomposition is the same size in all samples.…”