Wage Rigidity: A Look Inside the Firm

28 Pages Posted: 30 Aug 1999

See all articles by Beth Anne Wilson

Beth Anne Wilson

Board of Governors of the Federal Reserve System

Date Written: April 16, 1999

Abstract

This paper tests for nominal salary rigidity using panel data from two large service-sector firms. Distributions of the firms' salary changes exhibit nominal rigidity: few nominal pay cuts, a pile-up of observations at zero, and positive skewness and asymmetry. In addition, these characteristics become more pronounced in periods of low inflation. These results are much stronger than those found in the previous literature. Further analysis shows that the sizable measurement error in the PSID and the fact that establishment surveys typically follow average wages within jobs may bias the results in the previous literature toward rejecting downward nominal wage rigidity.

JEL Classification: E24, J31

Suggested Citation

Wilson, Beth Anne, Wage Rigidity: A Look Inside the Firm (April 16, 1999). Available at SSRN: https://ssrn.com/abstract=165588 or http://dx.doi.org/10.2139/ssrn.165588

Beth Anne Wilson (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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