Real and Nominal Wage Rigidities and the Rate of Inflation: Evidence from West German Microdata
Series
CEPR
ISSN
0265-8003
Type
discussion paper
Date Issued
2004-02-01
Author(s)
Sunde, Uwe
;
Bauer, Thomas
;
Bonin, Holger
Abstract
The Paper examines real and nominal wage rigidities. We estimate a switching regime model, in which the observed distribution of individual wage changes, computed from West German register data for 1976-97, is generated by simultaneous processes of real, nominal or no wage rigidity, and measurement error. The fraction of workers facing wage increases that are due to nominal, but mostly real, wage rigidity is substantial. The extent of real rigidity rises with inflation, whereas the opposite holds for nominal rigidity. Overall, the incidence of wage rigidity, which accelerates unemployment growth, is most likely minimized in an environment with moderate inflation.
Language
English
Keywords
downward wage rigidity
real effects of inflation
collective bargaining
switching regime model
west germany
HSG Classification
contribution to practical use / society
Refereed
Yes
Publisher
CEPR
Publisher place
London
Number
4271
Start page
45
Subject(s)
Division(s)
Eprints ID
71705