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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.

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.

Considers the treatment of openness and imperfect competition in the influential analysis of Layard, Nickell and Jackman′s (LNJ′s) Unemployment: Macroeconomic Performance and the Labour Market. Clarifies and completes LNJ′s treatment of openness through the provision of explicit analytical solutions to their model under fixed and flexible exchange rate regimes. Also provides a (largely informal) analysis of the sensitivity of the LNJ model′s results to the particular forms of imperfect competition assumed. It is argued that openness is crucial to the model′s properties, whereas imperfect competition is not. However, imperfect competitive behaviour may, more generally, have a major impact if it is not confined to the “well‐behaved form” allowed by LNJ.

Studies of the cyclical behavior of real wages have identified monetary shocks and examined the response of real wages and output or employment. A finding that real wages are procyclical in response to a positive monetary policy shock is taken as evidence that prices are stickier than wages. The purpose of this paper is to show that factors other than wage and price stickiness affect the response of real wages to a monetary policy shock.

The authors simulate two prominent dynamic stochastic general equilibrium models under a variety of parameter values and examine the cyclicality of the real wage.

The authors offer robust evidence that the real wage response to monetary policy is affected in important ways by properties of the economy other than stickiness of wages and prices, such as the importance of intermediate goods in the production process and the size of key elasticities. Consequently, the authors cannot appropriately infer the relative stickiness of wages and prices from examining only the response of real wages to a monetary policy shock.

The authors show in this study that examining the response of real wages is not enough to sort out the relative stickiness of prices and wages.

The aim of this article is to explore the current European debate over labour market flexibility. First, it considers lessons from economic theory. The classical consensus considering unemployment to be purely voluntary, the Keynesian consensus introducing the concept of demand deficient involuntary unemployment and finally the neo‐classical consensus returning us to the classical viewpoint of the dominance of real conditions in the labour market. In order to proceed without confusion the article provides a clear working definition of the natural rate of unemployment and its three main components, voluntary unemployment, structural unemployment and involuntary unemployment. It then proceed to analyse each of these main components in detail, illustrating the difference between a free market approach and a European Commission approach to reducing each component of unemployment. The article concludes that the future is dependent on all EU citizens as electors of governments and holders of wages to moderate.

Since the 2008 financial crisis, the UK workforce in general has experienced a period of stagnant and falling wages in both nominal and real terms. The main parties involved remain unsure of the consequences from such a historically unusual phenomenon. The purpose of this paper is twofold: first, to explore the main effect on job satisfaction and organizational commitment of those employees who had experienced pay reductions (nominal wage cuts or pay freezes under a positive inflation rate) as compared with those who experienced nominal pay rises during the recent recession; and second, to examine the moderating effect of employee involvement (EI) practices on that relationship. This was done by using aggregated employee perception data to measure organizational EI practices.

Employee-employer matched data were used, involving 8,489 employees and their associated 497 organizations (medium or large sized). The number of employees from each organization was between 15 and 25. The data used were extracted from the 2011 Workplace Employment Relations Study in the UK to which the authors applied hierarchical linear regression in STATA 13.

The results indicate that when compared with those employees who had nominal pay rises during the recession, employees who had wage cuts or freezes (with 5 percent inflation rate) are significantly and negatively associated with their job satisfaction and organizational commitment, even when controlling for important variables such as perception of job insecurity and the degree of adverse impact caused by recession on the organization studied. That is to say, facing the same perception of job loss, those who experienced pay reductions are significantly unhappier and less committed than those who had pay rises. However, the adverse effect of pay reductions on employees’ work attitudes is much less in workplaces characterized by a high, as opposed to a low level, of EI practices.

Implications, limitations, and further research issues are discussed in light of current employment relations’ practices.

The intention is to extend the current debate on employment relations under adverse changes such as pay reductions. Thus, the unique contribution of this study is to examine the value of EI in modifying extreme employee reactions to adverse changes.

The effects of the minimum wage on employment in Western economies are relatively uncontroversial. The introduction of a minimum wage in Czechoslovakia at the start of the transition, and its increase one year later, gives the opportunity to evaluate to what extent its effects on employment seem to have been comparable to those known for market economies. In order to go further than the measure of direct effects on employment, estimates and simulates a small‐scale macro‐econometric model over the period February 1991 to September 1992, which takes into account the feedback effects of the direct change in employment through other macroeconomic variables. These feedback effects seem to accentuate the increase in the level of employment generated by a fall in the minimum wage by two‐thirds after a term.