Evidence on Nominal Wage Rigidity from a Panel of U.S. Manufacturing Industries
Evidence on Nominal Wage Rigidity from a Panel of U.S. Manufacturing Industries

Author: Vivek Ghosal

Publisher:

Published: 1998

Total Pages: 0

ISBN-13:

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We provide a set of stylized facts on the response of industry nominal wage growth to aggregate and industry- specific influences using annual data for 450 U.S. manufacturing industries over the period 1958 to 1989. We find support for the canonical wage contracts model; the response of nominal wage growth to expected inflation is estimated to be between 0.6 and 0.8. This estimate holds for several sectors within manufacturing. The response of nominal wage growth to unexpected inflation is around 0.1, indicating a striking departure from the "classical" assumption of full indexation. We also find support for the multi-sector wage indexation models. The estimated profit-sharing elasticity is positive, as hypothesized in these models. The instrumental variable estimates of the profit-sharing elasticity are typically between 0.1 and 0.2.

The Extent and Consequences of Downward Nominal Wage Rigidity
The Extent and Consequences of Downward Nominal Wage Rigidity

Author: Joseph G. Altonji

Publisher:

Published: 1999

Total Pages: 48

ISBN-13:

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Using the Panel Study of Income Dynamics, we find that true wage changes have many fewer nominal cuts and more nominal freezes than reported nominal wage changes. The data overwhelmingly rejects a model of flexible wage changes and provides some evidence against a model of perfect downward rigidity in favor of a more general model. The more general model incorporates downward rigidity but specifies that nominal wage cuts may occur when large cuts would occur in the absence of wage rigidity. However, the results of the general model imply that nominal wage cuts are rare. We also analyze the personnel files of a large corporation and find cuts in base pay are rare and almost always associated with changes in full time status or a switch between compensation schemes involving incentives. Our evidence on the consequences of nominal wage rigidity is mixed. We find modest support for the hypothesis that workers who are overpaid because of nominal wage rigidity are less likely to quit.

How Prevalent Is Downward Rigidity in Nominal Wages?
How Prevalent Is Downward Rigidity in Nominal Wages?

Author: Ekaterina S. Jardim

Publisher:

Published: 2019

Total Pages: 23

ISBN-13:

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For more than 80 years, many macroeconomic analyses have been premised on the assumption that workers' nominal wage rates cannot be cut. The U.S. evidence on this assumption has been inconclusive because of distortions from reporting error in household surveys. Following a British literature, we reconsider the issue with more accurate wage data from the payroll records of most employers in the State of Washington over the period 2005-2015. For every one of the 40 four-quarters-apart periods for which we observe year-to-year wage changes, we find that at least 20 percent of job stayers experience nominal wage reductions.

The Labor Market and Economic Adjustment
The Labor Market and Economic Adjustment

Author: Pierre-Richard Agénor

Publisher: International Monetary Fund

Published: 1995-11-01

Total Pages: 98

ISBN-13: 1451854781

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This paper examines the role of the labor market in the transmission process of adjustment policies in developing countries. It begins by reviewing the recent evidence regarding the functioning of these markets. It then studies the implications of wage inertia, nominal contracts, labor market segmentation, and impediments to labor mobility for stabilization policies. The effect of labor market reforms on economic flexibility and the channels through which labor market imperfections alter the effects of structural adjustment measures are discussed next. The last part of the paper identifies a variety of issues that may require further investigation, such as the link between changes in relative wages and the distributional effects of adjustment policies.

The American Economic Review
The American Economic Review

Author:

Publisher:

Published: 2000

Total Pages: 928

ISBN-13:

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Includes papers and proceedings of the annual meeting of the American Economic Association. Covers all areas of economic research.