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Nominal wage rigidity and the rate of inflation

Nickell, Stephen and Quintini, Glenda (2001) Nominal wage rigidity and the rate of inflation. CEPDP, 489. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753014491

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Identification Number: 489

Abstract

Using the accurate and extensive data available in the UK New Earnings Survey, this paper investigates the extent to which nominal wages are downwardly rigid and whether such rigidity interferes with necessary real wage adjustments when inflation is low. Despite the substantial numbers of individuals whose nominal wages fall from one year to the next, we find that if long-run inflation is one percent higher, the number of individuals with negative real pay growth increases by around 1.4 percent. This is controlling for the median and dispersion of the real wage change distribution.

Item Type: Monograph (Discussion Paper)
Official URL: http://cep.lse.ac.uk
Additional Information: © 2001 the authors
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
JEL classification: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Employment, and Investment > E24 - Macroeconomics: Employment; Unemployment; Wages; Intergenerational Income Distribution (includes wage indexation)
E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E31 - Price Level; Inflation; Deflation
Sets: Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Date Deposited: 29 Jul 2008 16:15
Last Modified: 01 Oct 2010 09:14
URI: http://eprints.lse.ac.uk/id/eprint/20131

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