The Margins of Labour Cost Adjustment: Survey Evidence from European Firms

Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. We broaden the analysis beyond downward rigidity in base wages by investigating the use of other margins of labour cost adjustment at the firm level. Using data from a unique survey, we find that European firms make frequent use of other, more flexible, components of compensation to adjust the cost of labour. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. We also show how the margins of adjustment chosen are affected by firm and worker characteristics.European Union, firm survey, labour costs, wage rigidity.

Downward nominal and real wage rigidity : survey evidence from European firms

It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage rigidity in both real and nominal terms. The authors analyse which firm-level and institutional factors are associated with wage rigidity. The results indicate that it is related to workforce composition at the establishment level in a manner that is consistent with related theoretical models (e.g. efficiency wage theory, insider-outsider theory). The analysis also finds that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations.Labor Policies,Environmental Economics&Policies,Labor Markets,Income,Markets and Market Access

The margins of labor cost adjustment : survey evidence from European firms

Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. This paper broadens the analysis beyond downward rigidity in base wages by investigating the use of other margins of labor cost adjustment at the firm level. Using data from a unique survey, the authors find that firms make frequent use of other, more flexible, components of compensation to adjust the cost of labor. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. The paper also shows how the margins of adjustment chosen are affected by firm and worker characteristics.Labor Markets,Labor Policies,Environmental Economics&Policies,Microfinance,Economic Theory&Research

Downward nominal and real wage rigidity : Survey evidence from European firms

It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage rigidity in both real and nominal terms. We analyse which firm-level and institutional factors are associated with wage rigidity. Our results indicate that it is related to workforce composition at the establishment level in a manner that is consistent with related theoretical models (e.g. efficiency wage theory, insider-outsider theory). We also find that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulationsdownward nominal wage rigidity, downward real wage rigidity, wage indexation, survey data, European Union

Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms

It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage rigidity in both real and nominal terms. We analyse which firm-level and institutional factors are associated with wage rigidity. Our results indicate that wage rigidity is related to workforce composition at the establishment level in a manner that is consistent with related theoretical models (e.g. efficiency wage theory, insider-outsider theory). We also find that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations.Downward nominal wage rigidity, downward real wage rigidity, wage indexation, survey data, European Union.

The margins of labour cost adjustment : Survey evidence from European firms

Firms have multiple options at the time of adjusting their wage bills. However, previous literature has mainly focused on base wages. We broaden the analysis beyond downward rigidity in base wages by investigating the use of other margins of labour cost adjustment at the firm level. Using data from a unique survey, we find that firms make frequent use of other, more flexible, components of compensation to adjust the cost of labour. Changes in bonuses and non-pay benefits are some of the potential margins firms use to reduce costs. We also show how the margins of adjustment chosen are affected by firm and worker characteristicslabour costs, wage rigidity, firm survey, European Union

Downward nominal and real wage rigidity: Survey evidence from European firms. National Bank of Belgium Working Paper No. 182, November 2009

It has been well established that the wages of individual workers react little, especially downwards, to shocks that hit their employer. This paper presents new evidence from a unique survey of firms across Europe on the prevalence of downward wage rigidity in both real and nominal terms. We analyse which firm-level and institutional factors are associated with wage rigidity. Our results indicate that it is related to workforce composition at the establishment level in a manner that is consistent with related theoretical models (e.g. efficiency wage theory, insider-outsider theory). We also find that wage rigidity depends on the labour market institutional environment. Collective bargaining coverage is positively related with downward real wage rigidity, measured on the basis of wage indexation. Downward nominal wage rigidity is positively associated with the extent of permanent contracts and this effect is stronger in countries with stricter employment protection regulations

LOMODRS: Stata module to perform Lo R/S test for long range dependence in timeseries

lomodrs performs Lo's (1991) modified rescaled range (R/S, "range over standard deviation") test for long range dependence of a time series. The classical R/S test, devised by Hurst (1951) and Mandelbrot (1972), is shown to be excessively sensitive to "short-range dependence" (e.g. ARMA components). Lo's modified version of the statistic takes account of short-range dependence by performing a Newey-West correction (using a Bartlett window) to derive a consistent estimate of the long-range variance of the timeseries. Inference from the modified R/S test for long range dependence is complementary to that derived from that of other tests for long memory, or fractional integration in a timeseries, such as kpss, gphudak, modlpr and roblpr. This is version 1.0.3 of the software, updated from that published in STB-60 and compatible with Stata version 8 syntax. It may be applied to a single timeseries in a panel with the if qualifier or to all timeseries with the by prefix.time-series data, long range dependence, r/s test, rescaled range test