Time-dependent or state-dependent wage-setting? Evidence from periods of macroeconomic instability
Number of Authors: 2
2016 (English)In: Journal of Monetary Economics, ISSN 0304-3932, E-ISSN 1873-1295, Vol. 78, 50-66 p.Article in journal (Refereed) Published
Administrative data on monthly wages in Iceland during 1998-2010 provide new insight into nominal wage rigidity. Unlike the data used in previous work, ours have a higher frequency, minimal measurement error, and a long sample including a period of substantial macroeconomic instability. We find that the monthly frequency of nominal wage changes is 13 percent. Although nominal wage cuts are rare, their frequency rises following a large macroeconomic shock. Timing of wage changes is both time-dependent and state-dependent: we find evidence of synchronization of adjustment and contracts of fixed duration, but also that inflation and unemployment over the wage spell affect the timing of adjustment.
Place, publisher, year, edition, pages
2016. Vol. 78, 50-66 p.
Wage rigidity, Wage setting, Microdata evidence
Economics and Business
IdentifiersURN: urn:nbn:se:su:diva-130884DOI: 10.1016/j.jmoneco.2016.01.001ISI: 000374368400004OAI: oai:DiVA.org:su-130884DiVA: diva2:933894