Price, wage and employment response to shocks: evidence from the WDN survey

Bertola, Giuseppe; Dabusinskas, Aurelijus; Hoeberichts, Marco; Izquierdo, Mario; Kwapil, Claudia; Montornès, Jérémi; Radowski, Daniel

doi:10.1016/j.labeco.2012.03.008

“…Given the large heterogeneity across the 25 EU countries covered by WDN3 in terms 1 The first, second and third waves of the WDN survey are referred to as WDN1, WDN2 and WDN3 respectively. See Babecký et al (2012), Bertola et al (2012), Druant et al (2012) and Galuscak et al (2012) for an overview of WDN1 evidence and Fabiani et al (2015) for a summary of the main findings of WDN2. 2 The WDN survey collects information that enables researchers to examine the effects on wage, employment and price adjustments of firm characteristics as well as of the economic environment and institutional features of the countries in which the firms operate.…”

Section: Introductionmentioning

confidence: 99%

Labour Market Adjustment in Europe During the Crisis: Microeconomic Evidence from the Wage Dynamics Network Survey

Izquierdo¹,

Jimeno²,

Κοσμά³

et al. 2017

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Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wagesetting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms' adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey. JEL: E24, J30, J52, J68 This evidence thus suggests a simple taxonomy of countries as regards their unemployment and GDP performance during the European sovereign debt crisis (2010-13):  Group I: countries where the unemployment rate decreased and GDP increased (the Czech Republic,

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“…The first, second and third waves of the WDN survey are referred to as WDN1, WDN2 and WDN3 respectively. See Babecký et al (2012), Bertola et al (2012), Druant et al (2012) and Galuscak et al (2012) for an overview of WDN1 evidence and Fabiani et al (2015) for a summary of the main findings of WDN2.…”

mentioning

confidence: 99%

Labour Market Adjustment in Europe During the Crisis: Microeconomic Evidence from the Wage Dynamics Network Survey

Izquierdo

¹

,

Jimeno

²

,

Κοσμά³

et al. 2017

Self Cite

View full text Add to dashboard Cite

Against the backdrop of continuing adjustment in EU labour markets in response to the Great Recession and the sovereign debt crisis, the European System of Central Banks (ESCB) conducted the third wave of the Wage Dynamics Network (WDN) survey in 2014-15 as a follow-up to the two previous WDN waves carried out in 2007 and 2009. The WDN survey collected information on wagesetting practices at the firm level. This third wave sampled about 25,000 firms in 25 European countries with the aim of assessing how firms adjusted wages and employment in response to the various shocks and labour market reforms that took place in the European Union (EU) during the period 2010-13. This paper summarises the main results of WDN3 by identifying some patterns in firms' adjustments and labour market reforms. It seeks to lay out the main lessons learnt from the survey in terms of both the general response of EU labour markets to the crisis and how these responses varied across the countries that took part in the survey.

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“…1 Evidence from interviews with business owners and firm managers have even suggested that selective layoffs are usually preferred to across-the-board wage reductions (Bewley (1999)). Bertola et al (2012), using data from the same survey of European firms that this paper will analyse, found that only two percent of firms would use base wage cuts as the main channel of labour cost reduction if faced with a significant cost shock. A considerably higher percentage reported that they would rely on reducing staff numbers or hours worked as their main strategy.…”

Section: Introductionmentioning

confidence: 93%

Why Firms Avoid Cutting Wages: Survey Evidence from European Firms

Caju

¹

,

Κοσμά²,

Lawless

³

et al. 2013

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The rarity with which firms reduce nominal wages has been frequently observed, even in the face of considerable negative economic shocks. This paper uses a unique survey of fourteen European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why they avoid cutting wages. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in euro area countries but were one of the lowest ranked obstacles in non-euro area countries. The paper examines how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations put forward for the infrequency of wage cuts.

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Price, wage and employment response to shocks: evidence from the WDN survey

Cited by 60 publications

References 14 publications

Labour Market Adjustment in Europe During the Crisis: Microeconomic Evidence from the Wage Dynamics Network Survey

Labour Market Adjustment in Europe During the Crisis: Microeconomic Evidence from the Wage Dynamics Network Survey

Labour Market Adjustment in Europe During the Crisis: Microeconomic Evidence from the Wage Dynamics Network Survey

Why Firms Avoid Cutting Wages: Survey Evidence from European Firms

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