The symmetry of the wage-change distribution: Survey and contract data

Christofides, Louis N.; Stengos, Thanasis

doi:10.1007/s001810100111

Cited by 10 publications

(8 citation statements)

References 4 publications

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“…Subject to rounding, similar comments hold for the sub-samples. 13 The calculated F value is 0.794 while the critical one is 1.94.…”

Section: Resultsmentioning

confidence: 89%

“…The choice of n = 8 appears reasonable 11 , the fit of the equation is satisfactory, and the representative histogram falls off to zero as n increases to 8. 12 A test for structural homogeneity above and below the median, which tests the symmetry of the wage-change distribution without imposing any distributional restrictions, does not reject symmetry, 13 suggesting that ef- 11 We have experimented with other values of n, the number of percentage-point bars included in the data. The lower value of n = 5 failed to capture needed density when the median rate of wage inflation was high.…”

Section: Resultsmentioning

confidence: 99%

“…Crawford and Harrison (1998) also apply hazard methods to their data and investigate whether the wagechange hazard depends negatively on the rate of inflation. Christofides and Stengos (1998) use non-parametric techniques to examine specifically the symmetry of nominal wage-change distributions, drawn from both survey and contract data. They report more asymmetry at times of low inflation.…”

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confidence: 99%

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Nominal Wage Rigidity in Contract Data: A Parametric Approach

Christofides

Leung

2003

SSRN Journal

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Using wage agreements reached in the Canadian unionized sector during 1976-99, a period of high as well as exceptionally low inflation, we consider how histograms of wage adjustment change as inflation reaches the low levels of the 1990s. The histograms and parametric tests suggest that wage adjustment is characterized by downward nominal rigidity and significant spikes at zero. There is some evidence of modest menu-cost effects. We examine whether the rigidity features of wage adjustment are sensitive to indexation provisions and investigate whether the distinction between short and long contracts is useful.

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“…Subject to rounding, similar comments hold for the sub-samples. 13 The calculated F value is 0.794 while the critical one is 1.94.…”

Section: Resultsmentioning

confidence: 89%

Section: Resultsmentioning

confidence: 99%

mentioning

confidence: 99%

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Nominal Wage Rigidity in Contract Data: A Parametric Approach

Christofides

Leung

2003

SSRN Journal

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“…We use data on whether the payslip was checked ± a unique feature of the BHPS ± 1 Recent papers by Christo®des and Leung (1998), Crawford and Harrison (1998) and Fortin (1996) study the issue using Canadian union contract data. Christo®des and Stengos (1998) use these data and some individual data similar to US work and the present study.…”

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confidence: 95%

Nominal Wage Rigidity in the United Kingdom

Smith

2000

The Economic Journal

110

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This paper studies the degree of downward rigidity in nominal wages in the United Kingdom using micro-data. Around 9% of employees who remain in the same job from one year to the next have zero pay growth. But on investigating the causes of rigidity we ®nd that up to ninetenths can be attributed to`symmetric' causes (such as contracts and menu costs) or to error. Thus only 1% of workers have pay that may be downwardly rigid. This suggests asymmetric, downward rigidity is not large enough to have serious macroeconomic consequences. The labour market provides almost no evidence to support a positive in¯ation target.The idea that nominal wages might be rigid has a long history, stretching back at least as far as Keynes (1936). In addition to any intrinsic interest in the behaviour of the price of labour, the issue has important implications for the macroeconomy. Downwardly rigid nominal wages could provide a rationale for a positive optimal rate of in¯ation and hence for the pursuance of a positive in¯ation target. As Tobin (1972) argued, if wages are rigid downwards, negative demand or positive supply shocks leave real wages higher than marginal product, resulting in unemployment. Higher in¯ation could alleviate this unemployment by reducing the real wage. Thus the cost of downward nominal rigidity ± which can also be interpreted as the cost of very low in¯ation where downward rigidity exists ± is unemployment.Downward rigidity implies asymmetry in wage changes: nominal wages are more likely to rise than to fall. Symmetric rigidities, whereby nominal wages are sticky in both directions, can also have detrimental macroeconomic implications. Unemployment is a feature of many models of long-term or staggered contracts (see, for example, Mankiw and Romer, 1991). However, symmetric rigidities do not have the same implications for the optimal rate of in¯ation: the effects of symmetric rigidities cannot be alleviated by a higher in¯ation rate.In this paper, nominal rigidity is taken to mean a 0% nominal pay change. Clearly wages are in some sense`rigid' if they do not move as much as theỳ should'. It is almost impossible in practice to calculate how much pay`should' change, although a simple conception of this warranted growth might be related to the change in the individual's productivity. A 0% nominal wage change has potentially special features, however. Psychological studies, which focus on downward rigidity, suggest that zero is a barrier of special importance (Kahneman et al., 1986;Blinder and Choi, 1990). Menu costs also impart

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“…Recent applications of the approaches to individual compensation data include Lebow et al (1995), McLaughlin (1999McLaughlin ( , 2000, Lebow et al (1999), and Nickell and Quintini (2001). Christofides and Leung (2000) and Christofides and Stengos (2000) use union contract data.…”

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confidence: 99%

Downward Nominal Rigidity in West German Earnings, 1975-95

Beißinger

Knoppik

2001

German Economic Review

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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.

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The symmetry of the wage-change distribution: Survey and contract data

Cited by 10 publications

References 4 publications

Nominal Wage Rigidity in Contract Data: A Parametric Approach

Nominal Wage Rigidity in Contract Data: A Parametric Approach

Nominal Wage Rigidity in the United Kingdom

Downward Nominal Rigidity in West German Earnings, 1975-95

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