Empirical Economics

, Volume 36, Issue 2, pp 321–338 | Cite as

Downward nominal wage rigidity in Europe: an analysis of European micro data from the ECHP 1994–2001

Original Paper

Abstract

This paper substantially extends the available evidence on downward nominal wage rigidity in the European Union (EU) and the Euro Area. We develop an econometric multi-country model based on Kahn’s (Am Econ Rev 87(5):993–1008, 1997) histogram-location approach and apply it to employee micro data from the European Community Household Panel for 12 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 EU. 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.

Keywords

Downward nominal wage rigidity Wage stickiness European community household panel ECHP Histogram-location approach European union Euro area 

JEL Classification

J30 E24 

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Copyright information

© Springer-Verlag 2008

Authors and Affiliations

  1. 1.University of RegensburgRegensburgGermany
  2. 2.University of Hohenheim and IZA (Bonn)StuttgartGermany

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