Does downward nominal wage rigidity dampen wage increases?

Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets. --Downward Nominal Wage Rigidity,Wage Stickiness,Wage Compression,Unconditional Quantile Regression

Real wage cyclicality of newly hired workers

Several recent marcoeconomic models rely on rigid wages. Especially wage rigidity of newly hired workers seems to play a crucial role, since the decision of opening a vacancy or not is mainly influenced by their real wages. However, so far little empirical evidence exists on how real wages of newly hired workers react to business cycle conditions. This paper aims at filling this gap for a large economy, namely Germany, by analyzing the cyclical behavior or real wages of newly hired workers while controlling for "cyclical up- and downgrading" in employer/employee matches. For the analysis two endogenous variables are used: either the "typical" (e.g. modal) real wages paid to entrants into particular jobs of particular firms or entrants' individual real wages. The results show that entry-wages are not rigid, but considerably respond to business cycle conditions. This finding strengthens Pissarides' (2009) dismissal of theories based on cyclically rigid hiring wages. Furthermore, I show that the procyclicality of the employment / population ratio is (nearly) identical to the procyclicality of real entry-wages

Does Downward Nominal Wage Rigidity Dampen Wage Increases?

Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets.downward nominal wage rigidity, wage stickiness, wage compression, unconditional quantile regression

Wage Rigidity in Germany

The interaction between inflation and unemployment has concerned researchers and politicians for a long time. But is there really a compulsory trade-off between inflation and unemployment? The author pursues this and other questions concerning wage rigidity. The first and major part of the book focuses on downward nominal wage rigidity (DNWR). It provides an overview on causes, extent, and implications of DNWR, deals with the macroeconomic consequences of DNWR, and analyzes whether or not DNWR affects workers differently. The second part of the book deals with real wage rigidity of newly hired workers over the business cycle. It provides a brief overview on previous research and recent developments, and it presents empirical evidence on the cyclicality of real entry-wages in Germany.Die Interaktion zwischen Inflation und Arbeitslosigkeit beschäftigt Forscher und Politiker bereits eine längere Zeit. Doch existiert tatsächlich ein Zielkonflikt zwischen Inflation und Arbeitslosigkeit? Der Autor geht dieser und anderen Fragen, die sich mit Lohnstarreit beschäftigen, nach. Der erste und gewichtigste Teil des Buches beschäftigt sich mit Abwärtsnominallohnstarrheit. Er bietet einen Überblick über Ursachen, Ausmaß und Implikationen dieser Starrheit, betrachtet ihre makroökonomischen Konsequenzen und untersucht inwiefern die Starrheit Arbeitnehmer unterschiedlich betrifft. Der zweite Teil des Buches beschäftigt sich mit der Reallohnrigidität neu eingestellter Arbeitnehmer über den Konjunkturzyklus. Der Buchteil bietet einen kurzen Überblick bisheriger empirischer Untersuchungen und neuester Entwicklungen und stellt empirische Evidenz zur Zyklizität von Einstiegslöhnen in Deutschland bereit

From potential to real entrepreneurship

"Not everyone who plans to set up a firm succeeds in doing so. This paper focuses on the phase before a firm is founded, the pre-nascent stage of the entrepreneurship process. Based upon cross-sectional data from the German section of the Global Entrepreneurship Monitor (GEM), the specific aim of this paper is to shed some light on the selection that takes place during the entrepreneurial process and to explain empirically demographic and cognitive characteristics and differences between latent nascent entrepreneurs, nascent entrepreneurs and young entrepreneurs. The results clearly reveal that there are both significant differences between and common determinants of the three phases of the entrepreneurial process. Education, the readiness to take risks, and role models are very important determinants during all phases. However, the regional environment and the age of the entrepreneur have quite a differentiating impact during the entrepreneurial process." (Author's abstract, IAB-Doku) ((en))Unternehmensgründung, Unternehmer, Unternehmensgründung - Planung, unternehmerische Qualifikation, Risikobereitschaft, Qualifikation, Berufsrolle, regionale Disparität, altersspezifische Faktoren

Does downward nominal wage rigidity dampen wage increases?

Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets

Does downward nominal wage rigidity dampen wage increases?

Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets

Does downward nominal wage rigidity dampen wage increases?

"Viele empirische Studien, die die Komprimierung von Lohnkürzungen betrachteten, finden einen hohen Grad an Abwärtsnominallohnstarrheit (ANLS). Die resultierenden makroökonomischen Effekte scheinen jedoch überraschend gering zu sein. Dieser Widerspruch kann in einem intertemporalen Rahmen erklärt werden, in dem ANLS nicht nur Nominallohnkürzungen verhindert, sondern auch dazu führt, dass Firmen Lohnerhöhungen komprimieren. Wir analysieren mit Hilfe von Unconditional Quantile Regression und Seemingly Unrelated Regression, ob eine Komprimierung von Lohnerhöhungen stattfindet wenn ANLS vorliegt. Der hierfür genutzt Datensatz umfasst mehr als 169 Millionen Lohnänderungen. Wir finden Evidenz für eine Komprimierung von Lohnerhöhungen und nur sehr geringe Effekte von ALNS auf das durchschnittliche Reallohnwachstum. Die Ergebnisse deuten daraufhin, dass ANLS kein starkes Argument gegen die Zielsetzung niedriger Inflationsraten liefert." (Autorenreferat)"Focusing on the compression of wage cuts, many empirical studies find a high degree of downward nominal wage rigidity (DNWR). However, the resulting macroeconomic effects seem to be surprisingly weak. This contradiction can be explained within an intertemporal framework in which DNWR not only prevents nominal wage cuts but also induces firms to compress wage increases. We analyze whether a compression of wage increases occurs when DNWR is binding by applying Unconditional Quantile Regression and Seemingly Unrelated Regression to a data set comprising more than 169 million wage changes. We find evidence for a compression of wage increases and only very small effects of DNWR on average real wage growth. The results indicate that DNWR does not provide a strong argument against low inflation targets." (author´s abstract

Expensive and low-price places to live : regional price levels and the agglomeration wage differential in Western Germany

"Recently, there has been a renewed interest in the agglomeration wage differential. One of the open research question is whether wage differences between large cities and the rural country are due to unobserved differences in regional price levels. In this paper information on regional price levels for western German regions is used to assess this wage differential. Since for many regions price information is not available. Multiple Imputation is used to generate completed data sets. It can be shown that this strategy is more reliable than simply using predictions of regression analysis. The results obtained show that the agglomeration wage differential in Germany is smaller than in the US, and that only a minor part of it can be explained by differences in prices." (Author's abstract, IAB-Doku) ((en))Lohnunterschied, regionale Disparität, Preisniveau, Westdeutschland, Bundesrepublik Deutschland

From potential to real entrepreneurship

"Not everyone who plans to set up a firm succeeds in doing so. This paper focuses on the phase before a firm is founded, the pre-nascent stage of the entrepreneurship process. Based upon cross-sectional data from the German section of the Global Entrepreneurship Monitor (GEM), the specific aim of this paper is to shed some light on the selection that takes place during the entrepreneurial process and to explain empirically demographic and cognitive characteristics and differences between latent nascent entrepreneurs, nascent entrepreneurs and young entrepreneurs. The results clearly reveal that there are both significant differences between and common determinants of the three phases of the entrepreneurial process. Education, the readiness to take risks, and role models are very important determinants during all phases. However, the regional environment and the age of the entrepreneur have quite a differentiating impact during the entrepreneurial process." (author's abstract)Nicht jeder, der plant, ein Unternehmen zu gründen, ist dabei erfolgreich. Die Studie konzentriert sich auf die Phase vor der Unternehmensgründung, die Planungsstufe des unternehmerischen Prozesses. Auf der Grundlage von Querschnittsdaten der deutschen Sektion des Global Entrepreneurship Monitor (GEM) werden die Selektionsprozesse beleuchtet, die im Prozess der Unternehmensgründung ablaufen; außerdem werden die demographischen und kognitiven Merkmale und Unterschiede zwischen potenziellen Unternehmensgründern, tatsächlichen Unternehmernsgründern und Jungunternehmern empirisch erklärt. Die Ergebnisse belegen eindeutig, dass es sowohl signifikante Unterschiede zwischen den drei Phasen des unternehmerischen Prozesses als auch gemeinsame Determinanten dieser drei Phasen gibt. Bildung, Risikobereitschaft und Rollenmodelle sind die wichtigsten Determinanten in allen Phasen. Darüber hinaus haben auch regionale und altersspezifische Faktoren differenzierende Auswirkungen im Verlauf der Unternehmensgründung. (IAB