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Book part
Publication date: 21 April 2010

Louis N. Christofides and Paris Nearchou

We study the distortions that downward nominal and real wage rigidity would induce to a flexible form of a notional, rigidity-free, distribution of wage change using the…

Abstract

We study the distortions that downward nominal and real wage rigidity would induce to a flexible form of a notional, rigidity-free, distribution of wage change using the histogram-location approach. We examine alternative methods of generating the histograms that support the econometric search for rigidity distortions and implement our approach to inflation sub-periods that should be characterised by different patterns of nominal and real rigidities. We establish the general applicability of the approach to these sub-periods and find results consistent with expectations.

Details

Jobs, Training, and Worker Well-being
Type: Book
ISBN: 978-1-84950-766-0

Article
Publication date: 14 June 2011

Vesna Stavrevska

The purpose of the paper was to establish the implications of globalisation for labour markets when efficiency wages create endogenous wage rigidity and to re‐examine the…

2165

Abstract

Purpose

The purpose of the paper was to establish the implications of globalisation for labour markets when efficiency wages create endogenous wage rigidity and to re‐examine the credibility of the arguments that call for deregulation, more wage flexibility and less social protection in this context.

Design/methodology/approach

The role of efficiency wages is reviewed in the traditional international economics theory, new economic geography and the neo‐Schumpeterian perspective towards international competitiveness.

Findings

First, taking into account endogenous sources of wage rigidity has different implications for employment, inequality, regional growth convergence and the role of the welfare state in the context of international competitiveness, from those derived when assuming them away or taking them as imposed by labour market institutions. Second, policies that would substantially reduce social security or lead to cost‐cuts may have an adverse effect on effort and thus on productivity.

Originality/value

To the author's knowledge, this paper is the only review in the literature that concentrates on efficiency wages applied in international trade.

Details

International Journal of Manpower, vol. 32 no. 3
Type: Research Article
ISSN: 0143-7720

Keywords

Open Access
Article
Publication date: 8 December 2020

Aleksandar Vasilev

The author augments an otherwise standard business-cycle model with a rich government sector and adds monopolistic competition in the product market and rigid prices, as well as…

1412

Abstract

Purpose

The author augments an otherwise standard business-cycle model with a rich government sector and adds monopolistic competition in the product market and rigid prices, as well as rigid wages a la Calvo (1983) in the labor market.

Design/methodology/approach

This specification with the nominal wage rigidity, when calibrated to Bulgarian data after the introduction of the currency board (1999–2018), allows the framework to reproduce better observed variability and correlations among model variables and those characterizing the labor market in particular.

Findings

As nominal wage frictions are incorporated, the variables become more persistent, especially output, capital stock, investment and consumption, which help the model match data better, as compared to a setup without rigidities.

Practical implications

The findings suggest that technology shocks seem to be the dominant source of economic fluctuations, but nominal wage rigidities as well as the monopolistic competition in the product market, might be important factors of relevance to the labor market dynamics in Bulgaria, and such imperfections should be incorporated in any model that studies cyclical movements in employment and wages.

Originality/value

The computational experiments performed in this paper suggest that wage rigidities are a quantitatively important model ingredient, which should be taken into consideration when analyzing the effects of different policies in Bulgaria, which is a novel result.

Details

Journal of Economics and Development, vol. 24 no. 1
Type: Research Article
ISSN: 1859-0020

Keywords

Book part
Publication date: 11 December 2004

Jakob B. Madsen

This paper examines the hypotheses that the length and the depth of the Great Depression were a result of sticky prices or sticky nominal wages using panel data for industrialized…

Abstract

This paper examines the hypotheses that the length and the depth of the Great Depression were a result of sticky prices or sticky nominal wages using panel data for industrialized and semi-industrialized countries. The results show that price stickiness, particularly, and wage stickiness were key propagating factors during the first years of the Depression. It is found that prices adjusted slowly to wages, particularly in manufacturing. Manufacturing wages are also found to adjust relatively slowly to innovations in prices, but unemployment exerted strong downward pressure on wage growth.

Details

Research in Economic History
Type: Book
ISBN: 978-1-84950-282-5

Article
Publication date: 1 December 1997

Andrés E. Marinakis

During the 1980s Latin America’s inflation problem worsened and successive stabilization programmes failed in many countries. This led to an increasing concern about the degree of…

1085

Abstract

During the 1980s Latin America’s inflation problem worsened and successive stabilization programmes failed in many countries. This led to an increasing concern about the degree of rigidity imposed on the economy by different labour market structures built up over many decades. Wage indexation, in particular, was often blamed for the failure of stabilization and adjustment programmes. Examines the different components of an indexing system and assesses the degree of flexibility that the systems implemented in some countries brought to the labour market. While a particular indexing system may have the effect of reducing wage flexibility in certain periods, the analysis of data at the macro level shows that in the long term wage indexation has not been insurmountable obstacle. Stresses that wage determination is just one of the key processes with a substantial influence on inflation. In the case of high inflationary countries, the existence of various key prices draw attention to the need for co‐ordination in the adjustment of different prices during the application of a stabilization programme.

Details

Journal of Economic Studies, vol. 24 no. 6
Type: Research Article
ISSN: 0144-3585

Keywords

Article
Publication date: 15 May 2007

Petri Böckerman, Seppo Laaksonen and Jari Vainiomäki

This paper aims to explore the incidence of nominal and real wage cuts in the Finnish private sector during the 1990s.

Abstract

Purpose

This paper aims to explore the incidence of nominal and real wage cuts in the Finnish private sector during the 1990s.

Design/methodology/approach

Estimation of econometric models for the probability of wage cuts using individual‐level wage survey data from the payroll records of the Finnish employers' organizations.

Findings

Centralized nominal wage freezes together with a positive inflation rate produced real wage cuts for a large proportion of workers during the worst recession years of the early 1990s. Hence, centralized bargaining shaped the adjustment. The share of nominal wage cuts does not increase with falling inflation, which is consistent with downward wage rigidities. Full‐time workers have had a lower likelihood of wage cuts compared with part‐time workers. Declines in wages have also been more common in small plants. There is an important transitory component in wage cuts.

Practical implications

Provides useful information about the adjustment of wages at the individual level.

Originality/value

Few papers have analysed individual and employer characteristics that account for wage cuts. The paper contributes to the literature on wage rigidity.

Details

International Journal of Manpower, vol. 28 no. 2
Type: Research Article
ISSN: 0143-7720

Keywords

Article
Publication date: 6 November 2018

Matthias Strifler

This purpose of this paper to examine how profit sharing depends on the underlying profitability of firms. More precisely, motivated by theoretical research on fair wages and…

1054

Abstract

Purpose

This purpose of this paper to examine how profit sharing depends on the underlying profitability of firms. More precisely, motivated by theoretical research on fair wages and unionized labor markets, profit sharing is estimated for six different profitability categories: positive, increasing, positive and increasing, negative, decreasing and negative or decreasing.

Design/methodology/approach

The paper exploits a high-quality linked employer–employee data set covering the universe of Finnish workers and firms. Endogeneity of profitability and self-selection of firms in different profitability categories are accounted for by an instrumental variables approach. The panel-structure of the data is used to control for unobserved heterogeneity (spell and individual fixed effects).

Findings

Profits are shared if firms are profitable or become more profitable. The wage-profit elasticity varies between 0.03 and 0.13 in such firms. However, profits are not shared if firms make losses or become less profitable. There is no downward wage adjustment.

Research limitations/implications

Because of the instrumental variables approach the question of external validity arises. Further empirical research on profit sharing with an explicit focus on firm profitability is warranted. The results of the paper indicate a connection between rent sharing and wage rigidity, as suggested by union and fair wage theory.

Originality/value

This is the first paper to consistently estimate the extent of profit sharing depending on the underlying profitability of firms.

Details

Journal of Participation and Employee Ownership, vol. 1 no. 2/3
Type: Research Article
ISSN: 2514-7641

Keywords

Abstract

Details

Quantitative and Empirical Analysis of Nonlinear Dynamic Macromodels
Type: Book
ISBN: 978-0-44452-122-4

Book part
Publication date: 13 May 2019

Rosaria Rita Canale and Rajmund Mirdala

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II…

Abstract

The role of money and monetary policy of the central bank in pursuing macroeconomic stability has significantly changed over the period since the end of World War II. Globalization, liberalization, integration, and transition processes generally shaped the crucial milestones of the macroeconomic development and substantial features of economic policy and its framework in Europe. Policy-driven changes together with variety of exogenous shocks significantly affected the key features of macroeconomic environment on the European continent that fashioned the framework and design of monetary policies.

This chapter examines the key basis of the central bank’s monetary policy on its way to pursue and preserve the internal and external stability of the purchasing power of money. Substantial elements of the monetary policy like objectives and strategies are not only generally introduced but also critically discussed according to their accuracy, suitability, and reliability in the changing macroeconomic conditions. Brief overview of the Eurozone common monetary policy milestones and the past Eastern bloc countries’ experience with a variety of exchange rate regimes provides interesting empirical evidence on origins and implications of vital changes in the monetary policy conduction in Europe and the Eurozone.

Details

Fiscal and Monetary Policy in the Eurozone: Theoretical Concepts and Empirical Evidence
Type: Book
ISBN: 978-1-78743-793-7

Keywords

Article
Publication date: 1 February 1975

JOHN COYNE

This paper seeks to explain various aspects of labour market activity under oligopsonistic conditions by means of a kinked labour supply curve, the development of which appears to…

Abstract

This paper seeks to explain various aspects of labour market activity under oligopsonistic conditions by means of a kinked labour supply curve, the development of which appears to have been neglected in the literature. The ideas for this approach arose out of an ongoing empirical study of a large local labour market during which it became apparent that an extension of the case stated by Bronfenbrenner (1940) could be used to account for a wide range of observed behaviour. It is apparent that dominant employers can dictate conditions in the market even in situations where their concentration of employment is as low as 15–30% of total employment, and at this level one would expect the incidence and effect of oligopsony to be significant within the economy as a whole. Major labour market studies in the U.K. (MacKay et al 1971) and the U.S.A. (Rees and Shultz, 1970) have tended to ignore the consequences of employer interdependence, basically because they were centred on large conurbations. This is an area that may fruitfully be more extensively explored.

Details

Journal of Economic Studies, vol. 2 no. 2
Type: Research Article
ISSN: 0144-3585

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