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Sectoral differences in downward real wage rigidity: workforce composition, institutions, technology and competition
[Branchenspezifische Unterschiede in der Abwärtsreallohnstarrheit: Arbeitskraftstruktur, Institutionen, Technologie und Wettbewerb]

Author

Listed:
  • P. Du Caju

    (National Bank of Belgium)

  • C. Fuss

    (National Bank of Belgium
    Université Libre de Bruxelles 50)

  • L. Wintr

    (Central Bank of Luxembourg)

Abstract

This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, wage-bargaining institutions, technology and competition. We rely on a large administrative matched employer-employee dataset for Belgium over the period 1990–2002. Our results indicate that downward real wage rigidity is significantly higher for white-collar workers, lower for older workers and decreases with the level of earnings and bonuses. Beyond labour force composition effects, we find that wages are more rigid in sectors with predominant centralised wage-setting at the sector level as opposed to firm-level agreements. Also, more labour-intensive sectors and competitive sectors have more rigid wages.

Suggested Citation

  • P. Du Caju & C. Fuss & L. Wintr, 2012. "Sectoral differences in downward real wage rigidity: workforce composition, institutions, technology and competition [Branchenspezifische Unterschiede in der Abwärtsreallohnstarrheit: Arbeitskrafts," Journal for Labour Market Research, Springer;Institute for Employment Research/ Institut für Arbeitsmarkt- und Berufsforschung (IAB), vol. 45(1), pages 7-22, March.
    • Handle: RePEc:spr:jlabrs:v:45:y:2012:i:1:d:10.1007_s12651-012-0100-3
    DOI: 10.1007/s12651-012-0100-3
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    2. Philip Du Caju & Catherine Fuss & Ladislav Wintr, 2012. "Downward Wage Regidity for Different Workers and Firms," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 55(1), pages 5-32.
    3. Philip Du Caju & Theodora Kosma & Martina Lawless & Julian Messina & Tairi Rõõm, 2013. "Why firms avoid cutting wages: Survey evidence from European firms," Working Paper Research 251, National Bank of Belgium.
    4. Emmanuel Dhyne & Martine Druant, 2010. "Wages, labor or prices : How do firms react to shocks ?," Working Paper Research 193, National Bank of Belgium.
    5. Daniel Dias & Carlos Marques & Fernando Martins, 2015. "A replication note on downward nominal and real wage rigidity: survey evidence from European firms," Empirical Economics, Springer, vol. 49(3), pages 1143-1152, November.
    6. Pierpaolo Benigno & Luca Antonio Ricci & Paolo Surico, 2015. "Unemployment and Productivity in the Long Run: The Role of Macroeconomic Volatility," The Review of Economics and Statistics, MIT Press, vol. 97(3), pages 698-709, July.
    7. Lukesch, Veronika & Zwick, Thomas, 2021. "Outside options drive wage inequalities in continuing jobs: Evidence from a natural experiment," ZEW Discussion Papers 21-003, ZEW - Leibniz Centre for European Economic Research.
    8. Andrés Rodríguez-Clare & Mauricio Ulate & José P. Vásquez, 2020. "Trade with Nominal Rigidities: Understanding the Unemployment and Welfare Effects of the China Shock," NBER Working Papers 27905, National Bureau of Economic Research, Inc.
    9. Gábor Kátay, 2011. "Downward wage rigidity in Hungary," MNB Working Papers 2011/9, Magyar Nemzeti Bank (Central Bank of Hungary).
    10. Carlos Robalo Marques & Fernando Martins & Daniel Dias, 2013. "The determinants of downward wage rigidity: Some methodological considerations and new empirical evidence," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    11. Fernando Martins, 2013. "Survey evidence on price and wage rigidities in Portugal," Working Papers w201312, Banco de Portugal, Economics and Research Department.
    12. Veronika Lukesch & Thomas Zwick, 2024. "Do outside options drive wage inequalities in retained jobs? Evidence from a natural experiment," British Journal of Industrial Relations, London School of Economics, vol. 62(1), pages 127-153, March.
    13. Boris Hirsch & Thomas Zwick, 2015. "How Selective Are Real Wage Cuts? A Micro-analysis Using Linked Employer–Employee Data," LABOUR, CEIS, vol. 29(4), pages 327-347, December.
    14. Khoury, Laura, 2023. "Unemployment benefits and redundancies: Incidence and timing effects," Journal of Public Economics, Elsevier, vol. 226(C).
    15. Santoro, Emiliano & Petrella, Ivan & Pfajfar, Damjan & Gaffeo, Edoardo, 2014. "Loss aversion and the asymmetric transmission of monetary policy," Journal of Monetary Economics, Elsevier, vol. 68(C), pages 19-36.
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    More about this item

    Keywords

    Wage rigidity; Matched employer-employee data; Wage-bargaining institutions; Downward real wage rigidity;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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