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Sectoral Differences in Wage Freezes and Wage Cuts: Evidence from a New Firm Survey

ZEW - Centre for European Economic Research Discussion Paper No. 08-097

27 Pages Posted: 10 Dec 2008

See all articles by Holger Bonin

Holger Bonin

IZA Institute of Labor Economics; ZEW – Leibniz Centre for European Economic Research

Daniel Radowski

Deutsche Bundesbank

Multiple version iconThere are 2 versions of this paper

Date Written: 2008

Abstract

The paper provides evidence concerning incidence and sources of nominal wage rigidity in services and manufacturing, using a new and large employer survey on wage and price setting behaviour for Germany. We observe that wage freezes are more frequent in services than in manufacturing, whereas wage cuts are less frequent. The significant sector gaps do not vanish after controlling for relevant firm characteristics influencing the incidence of wage freezes and wage cuts, notably coverage by collective agreements and the degree of price competition on the product market. An analysis of firms' view on the reasons preventing wage cuts suggests that specific fear of excess worker turnover could explain distinct wage setting behaviour in services.

Keywords: Nominal Wage Rigidity, Efficiency Wages, Manufacturing and Services, Germany

JEL Classification: J31, L60, M52

Suggested Citation

Bonin, Holger and Radowski, Daniel, Sectoral Differences in Wage Freezes and Wage Cuts: Evidence from a New Firm Survey (2008). ZEW - Centre for European Economic Research Discussion Paper No. 08-097, Available at SSRN: https://ssrn.com/abstract=1314251 or http://dx.doi.org/10.2139/ssrn.1314251

Holger Bonin (Contact Author)

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany
+49 228 3894 303 (Phone)
+49 228 3894 510 (Fax)

ZEW – Leibniz Centre for European Economic Research

P.O. Box 10 34 43
L 7,1
D-68034 Mannheim, 68034
Germany

Daniel Radowski

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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