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Nominal Wage Rigidity in Contract Data: A Parametric Approach

Louis N. Christofides and Man Tuen Leung
Economica
Vol. 70, No. 280 (Nov., 2003), pp. 619-638
Stable URL: http://www.jstor.org/stable/3548897
Page Count: 20
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Nominal Wage Rigidity in Contract Data: A Parametric Approach
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Abstract

Using wage agreements reached in the Canadian unionized sector during 1976-99, a period of high as well as exceptionally low inflation, we consider how histograms of wage adjustment changed as inflation reached the low levels of the 1990s. The histograms and parametric tests suggest that wage adjustment is characterized by downward nominal rigidity and significant spikes at zero. There is some evidence of modest menu-cost effects. We examine whether the rigidity features of wage adjustment are sensitive to indexation provisions, and investigate whether the distinction between short and long contracts is useful.

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