How strong is the macroeconomic case for downward real wage rigidity?

Abstract

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Real wage rigidity and the new Phillips curve: the Brazilian case

“…Holden and Wulfsberg (2009) used data for 19 OECD countries from 1973 to 1999 to analyze wage rigidity at the industry level. They found evidence of downward real wage rigidity in the core European countries, and in the Anglo group, but not for the southern European countries, arguing that the explanation is due to unemployment benefits, union density, and the degree of coordinated wage setting.…”

Wage rigidities in Colombia: Measurement, causes, and policy implications

“…The average of 12% is relatively high, when compared to values of 3.7% found for major European areas in Holden and Wulfsberg (2009); relatively low with respect to the average of 15% found by Holden and Messina (2012, as cited in World Bank, 2012) for Latin America and the Caribbean countries; and similar to the case of Uruguay as reported in Messina and Sanz-de-Galdeano (2014).…”

“…We follow the empirical approach of Holden and Wulfsberg (2009), whose use has become popular for aggregate data analysis. Following their method, we explore the potential existence of DRWR by comparing observed real-wage-change distributions with constructed counterfactual or notional distributions in which wages are assumed to be flexible (i.e.…”

“…Specifically, the median nominal wage growth is above 20.39% (which is the value at which the 4th quartile starts), and the median real wage growth is above 15.71% (which is the value at which the 4th quartile starts for the real case). The selection of such subsample aims at ensuring that the constructed notional distributions are free of wage rigidities (as shown by Holden and Wulfsberg, 2009, the higher the growth rates, the lower the probability of wage rigidities is).…”

“…To conduct the analysis, we follow Holden and Wulfsberg (2009) and explore the potential existence of DRWR using aggregate data for the Colombian labor market. To be precise, we provide a sectoral-level analysis based on data from 59 sectors and 13 metropolitan areas over the period [2002][2003][2004][2005][2006][2007][2008][2009][2010][2011][2012][2013][2014].…”