Institut für Volkswirtschaftslehre

                                       Fachgebiet Dienstleistungs- und Arbeitsmarktökonomik (520G)

Prof. Dr. Thomas Beißinger

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Downward Nominal Wage Rigidity in Europe: An Analysis of European Micro Data from the ECHP 1994 - 2001
(with Christoph Knoppik)
Empirical Economics, 2008


This paper substantially extends the available evidence on downward nominal wage rigidity in the European Union and the Euro Area. We develop an econometric multi-country model based on Kahn’s (1997) histogram-location approach and apply it to employee micro data from the European Community Household Panel (ECHP) for twelve of the EU’s member states. Our estimates for the degree of downward nominal wage rigidity on the national as well as the EU-wide level point to substantial downward nominal wage rigidity within the European Union. A detailed comparison with other cross-national studies reveals an emerging consensus about which countries can be characterized as high or low rigidity countries, although the status of some countries remains unclear. The variation in national degrees of downward nominal wage rigidity cannot convincingly be explained by institutional variables.