January 2009

IZA DP No. 3923: Downward Nominal Wage Rigidity in Services: Direct Evidence from a Firm Survey

Daniel Radowski, Holger Bonin

published in: Economics Letters, 2010, 106 (3), 227-229

The paper uses a new German employer survey on wage setting practices to analyze incidence and sources of nominal wage rigidity in services vs. manufacturing. We observe that wage freezes are significantly more frequent and wage cuts less frequent in services. Reasons preventing wage cuts reported by employers suggest that fear of excess worker turnover could explain this distinct behavior.