Banking Wage Rigidity - An Econometric Panel Data Analysis for Western Europe and USA 1980-2006

Abstract

In the present paper an attempt will be made to show that in the banking sector wage rigidity increases as consumer inflation decreases. The immediate consequence is that banks cannot offer more competitive prices without shrinking profits. Hence, countries with strict labour laws hinder baking competitiveness. Each country will be considered as a banking sector. Data are annual for the period 1980-2006 covering many western European countries and the United States and are elaborated with the software package Eviews.

Keywords: Banking, Wage rigidity, Profitability, Competition

JEL Classification: G2, J41, L25, D4