Search results

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

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.

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.

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

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

The purpose of this paper is to explore the ability of monetary policy to generate real effects in laboratory general equilibrium production economies.

To understand why monetary policy is not consistently effective at stabilizing economic activity, the author vary the types of agents interacting in the economy and consider treatments where subjects are playing the role of households (firms) in an economy where automated firms (households) are programmed to behave rationally.

While the majority of participants’ expectations respond to monetary policy in the direction intended, subjects do form expectations adaptively, relying heavily on past variables and forecasts in forming two-steps-ahead forecasts. Moreover, in the presence of counterparts that are boundedly rational, forecast accuracy worsens significantly. When interacting with automated households, updating firms’ prices respond modestly to monetary policy and significantly to anticipated marginal costs and future prices. The greatest deviations in behavior from theoretical predictions arise from human households (HH). Households persistent oversupply of labor and under-consumption is attributed to precautionary saving and debt aversion. The results provide evidence that the effects of monetary policy on decision making hinge on the distribution of indebtedness of households.

The author present causal evidence of the effects of potential bounded rationality on agents’ consumption and labor decisions.

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.

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.

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.

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.

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.

The paper aims at developing a theoretical model for de facto dollarized small open economies focusing on currency substitution and nominal wages indexation to the exchange rate.

The analysis is performed in a general equilibrium “New Open Economy Macroeconomics” framework with nominal rigidities and imperfect competition in the nontraded good sector.

The paper finds that a dollar‐indexed economy with low degrees of payments/financial dollarization could experience higher costs in terms of exchange rate and output fluctuations when nominal shocks dominate real shocks, making stabilization programs more difficult to achieve in a rapid and less costly way.

The speed of adjustment of macro variables is faster in the highly dollarized economy as a response to a higher and more volatile inflation rate. A higher level of financial dollarization increases the frequency of domestic prices and wages revisions to nominal exchange rate shocks. This might explain, in turn, why nominal disturbances are shorter lived in the higher dollarized economies, and the asymmetry between financial and real dollarization

Contrary to the “conventional wisdom” that predicts a positive relationship between the degrees of dollarization and the exchange rate pass‐through, our model shows that the degree of dollarization and the degree of dollar indexation are not necessarily the same or even correlated.

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.

Provides an evaluation of the reality of the German economy after unification, also answers to some of the questions that the post‐unification era has raised, analyzes aggregate and sectoral data of the former GDR and the Federal Republic of Germany over the period 1970‐1989. The results characterize the former GDR with a steeper supply curve. While the central plan assumed a steady growth of real output over time, it eliminated producers’ incentives to vary capacity utilization in response to demand pressures. Demand pressures proved inflationary without determining conditions in the labor market. In contrast, the market‐oriented plan in West Germany tied output expansion and contraction with demand fluctuations. Consequently, inflationary effects of demand fluctuations appeared moderate in West Germany and real output growth was not sustained at a high level over time. Demand fluctuations determined employment changes in West Germany. Implications of these differences are analyzed in light of the reality of the post‐unification in Germany.

This paper constructs real wage series for nineteenth-century Algeria and Tunisia, and compares them with existing Egyptian and Syrian series. Archival sources are used for price and nominal wage data. Following Allen (2001), nominal wages are deflated with a consumer price index. The series are tested for robustness. Real wages were initially dispersed, but converged to similar levels by the end of the period. There is no evidence of a broad-based improvement in living standards over the period, with real wage series declining in Algeria, and stagnating in Egypt, Tunisia and Syria. The findings paint a less optimistic picture of living standards compared to other measures like GDP per capita and compared to some of the historical literature. Data for the Maghreb are scarce, and more work will need to be done on finding more wage and price observations.

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.

Using archival and primary source evidence, this chapter introduces the first real wage series from 1891 to 1930 for Brazil’s most important immigrant and industrial city, São Paulo. This is the first price series, nominal wage series, and real wage series for the city that covers the duration of the Old Republic. While scholars look to Rio de Janeiro evidence to compare Brazil’s cost of living to other southern cone and immigrant-receiving countries, it is preferable to use evidence from the primary destination city. Price deviations between the two cities underscore the need for these series. The results show foodstuff prices increased steadily over the period and more dramatically in the period during and after World War I. Hedonic wage regressions show hourly wages for unskilled, low-skilled, and medium-skilled workers did not increase accordingly. While the decline in real wages tapered off in the 1920s, real wages across skill levels did not recover to prewar levels. This new index suggests the city of São Paulo’s labor market was more integrated with Buenos Aires’s than with Rio de Janeiro’s and that Paulistano real wages did not recover in the 1920s to the extent that they did in other southern cone cities. Given these results, the puzzle as to why migrants continued to flock to the city prove more intriguing. The results also suggest that Vargas-era labor legislation had the potential to greatly improve the lives of the city’s working class, perhaps more so than in other cities.