Documents Du Caju, Philip 11 results

"Firms very rarely cut nominal wages, even in the face of considerable negative economic shocks. The authors of this article use a unique survey of 14 European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why the firms avoid cutting wages. They examine how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations for the infrequency of wage cuts. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in Western European (EU-15) countries but were one of the lowest-ranked obstacles in the new EU member-states in Central and Eastern Europe."

"The rarity with which firms reduce nominal wages has been frequently observed, even in the face of considerable negative economic shocks. This paper uses a unique survey of fourteen European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why they avoid cutting wages. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in euro area countries but were one of the lowest ranked obstacles in non-euro area countries. The paper examines how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations put forward for the infrequency of wage cuts."

"This paper examines whether differences in wage rigidity across sectors can be explained by differences in workforce composition, wage-bargaining institutions, technology and competition. We rely on a large administrative matched employer-employee dataset for Belgium over the period 1990 - 2002. Our results indicate that downward real wage rigidity is significantly higher for white-collar workers, lower for older workers and decreases with the level of earnings and bonuses. Beyond labour force composition effects, we find that wages are more rigid in sectors with predominant centralised wage-setting at the sector level as opposed to firm-level agreements. Also, more labour-intensive sectors and competitive sectors have more rigid wages."

"Although workers' nominal wages are seldom cut, firms have multiple options available if they require adjustments in their wage bills. We broaden the analysis of relative (in)flexibility in labour costs by investigating the use of other margins of labour cost adjustment at the firm level beyond base wages. Using data from a unique survey, we find that European firms make extensive use of other components of compensation to adjust the cost of labour. Interestingly, firms facing base wage rigidity are more likely to use alternative margins of labour cost adjustment; therefore there appears to be some degree of substitutability between wage flexibility and the flexibility of other cost components. 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 unionisation and firm and worker characteristics."

"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 characteristics."

"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."

"This paper investigates inter-industry wage differentials in Belgium, taking advantage of access to a unique matched employer-employee data set covering all the years from 1999 to 2005. Findings show the existence of large wage differentials among workers with the same observed characteristics and working conditions, employed in different sectors. These differentials are persistent and no particular downward or upward trend is observed. Further results indicate that ceteris paribus, workers earn significantly higher wages when employed in more profitable firms. The time dimension of our matched employer-employee data allows us to instrument firms' profitability by its lagged value. The instrumented elasticity between wages and profits is found to be quite stable over time and varies between 0.034 and 0.043. It follows that Lester's range of pay due to rent sharing fluctuates between about 24 and 37 percent of the mean wage. This rent-sharing phenomenon accounts for a large fraction of the industry wage differentials. We find indeed that the magnitude, dispersion and significance of industry wage differentials decreases sharply when controlling for profits."

"This paper presents estimates based on individual data of downward nominal and real wage rigidities for thirteen sectors in Belgium, Denmark, Spain and Portugal. Our methodology follows the approach recently developed for the International Wage Flexibility Project, whereby resistance to nominal and real wage cuts is measured through departures of observed individual wage change histograms from an estimated counterfactual wage change distribution that would have prevailed in the absence of rigidity. We evaluate the role of worker and firm characteristics in shaping wage rigidities. We also confront our estimates of wage rigidities to structural features of the labour markets studied, such as the wage bargaining level, variable pay policy and the degree of product market competition. We find that the use of firm-level collective agreements in countries with rather centralized wage formation reduces the degree of real wage rigidity. This finding suggests that some degree of decentralization within highly centralized countries allows firms to adjust wages downwards, when business conditions turn bad."

"This paper documents the existence and main patterns of inter-industry wage differentials across a large number of industries for 8 EU countries (Belgium, Germany, Greece, Hungary, Ireland, Italy, Netherlands, and Spain) at two points in time (in general 1995 and 2002) and explores possible explanations for these patterns. The analysis uses the European Structure of Earnings Survey (SES), an internationally harmonised matched employer-employee dataset, to estimate inter-industry wage differentials conditional on a rich set of employee, employer and job characteristics. After investigating the possibility that unobservable employee characteristics lie behind the conditional wage differentials, a hypothesis which cannot be accepted, the paper investigates the role of institutional, industry structure and industry performance characteristics in explaining inter-industry wage differentials. The results suggest that inter-industry wage differentials are consistent with rent sharing mechanisms and that rent sharing is more likely in industries with firm-level collective agreements and with higher collective agreement coverage."