Wage Dynamics Network (WDN)

About the network

General Purpose

The WDN has the specific objectives of i) identifying the sources and features of wage and labour cost dynamics that are most relevant for monetary policy and ii) clarifying the relationship between wages, labour costs and prices both at the firm and macro-economic level.

Regarding the first objective, the WDN is addressing the following topical research questions:

• How do wages, labour costs and their various components adjust over the business cycle and in response to various shocks? Are there sectoral and regional differences? Have the dynamics of wages and labour costs been affected by changes in the monetary policy regime (the start of EMU)?
• How often do wages change? Are wage rigidities nominal or real, symmetric or asymmetric? Do they differ across occupations, sectors, countries or regions?
• What are the sources of wage and labour cost rigidity? How do they depend on goods and labour market characteristics, in particular what institutional settings are behind each type of rigidity? Have rigidities of wages and labour costs and their components been affected by structural changes in the macro environment such as the globalisation of production, labour market reforms and changes in the degree of goods market competition?

Regarding the second objective, the following questions are being addressed by the WDN:

• How do changes in wages and other labour cost components at the worker’s level translate into marginal costs and output and pricing decisions at the firm level?
• How do wage and labour cost rigidities translate into price stickiness and inflation persistence?
• What factors, such as labour market institutions, the degree of product market competition and globalisation, influence the extent and the speed with which labour costs pass through into output and prices?

Research

The WDN is organised around four research groups:

The macro group explores the empirical characterisation of aggregate, country and sectoral wage and labour cost dynamics in the euro area, as well as the structural analysis of their determinants and their interaction with inflation dynamics.

The micro group follows three directions of research. One direction mostly focuses on disentangling the different responses of firms to shocks via employment, wages, and prices. The second direction looks at cross-country differences in the adjustment of relative wages to macroeconomic developments. The third direction concentrates on determining the nature and magnitude of possible wage rigidities across countries and sectors in the euro area.

The survey group is conducting an ad-hoc survey on wages, labour costs and price setting behaviour at the firm level.

The meta group is responsible for summarising the overall WDN results, with the aim of deriving the implications of the WDN research work.

Organisation

Chairman: Frank Smets (ECB)
Secretary: Ana Lamo (ECB)

Contact persons of the research groups:

• Macro and meta group: Frank Smets
• Micro group: Juan Francisco Jimeno (Banco de España)
• Survey group: Silvia Fabiani (Banca d’Italia)

Consultants: Giuseppe Bertola (Università di Torino), Julian Messina (Universitat de Girona)
WDN Working Paper Team: Gabriel Fagan (ECB), Philip Vermeulen (ECB), Giuseppe Bertola, Julian Messina, Ian Babecký (CNB), Hervé Le Bihan (Banque de France) and Thomas Mathae (Banque centrale du Luxembourg).

Publications

Macro Group Micro Group Survey Group

Macro Group

• No. 1302

  The immigrant/native wealth gap in Germany, Italy and Luxembourg

  Thomas Y. Mathä, Alessandro Porpiglia, Eva Sierminska

  28 Feb 2011

  •  1.76 MB Download

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• No. 1183

  Labor market institutions and the business cycle Unemployment rigidities vs. real wage rigidities

  Mirko Abbritti, Sebastian Weber

  21 Apr 2010

  •  1.65 MB Download

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• No. 1180

  Nominal and real wage rigidities. In theory and in Europe

  Markus Knell

  21 Apr 2010

  •  1.24 MB Download

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• No. 1080

  Productivity and job flows: heterogeneity of new hires and continuing jobs in the business cycle

  Juha Kilponen, Juuso Vanhala

  24 Aug 2009

  •  1.01 MB Download

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• No. 1067

  The dynamic effects of shocks to wages and prices in the United States and the euro area

  Rita Duarte, Carlos Robalo Marques

  03 Jul 2009

  •  1.36 MB Download

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• No. 1053

  Inflation dynamics with labour market matching: assessing alternative specifications

  Kai Christoffel, James Costain, Gregory de Walque, Keith Kuester, Tobias Linzert, Stephen Millard, Olivier Pierrard

  15 May 2009

  •  1.37 MB Download

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• No. 1048

  Downward wage rigidity and optimal steady-state inflation

  Gabriel Fagan, Julián Messina

  28 Apr 2009

  •  1.46 MB Download

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• No. 1047

  The impact of reference norms on inflation persistence when wages are staggered

  Markus Knell, Alfred Stiglbauer

  24 Apr 2009

  •  1.36 MB Download

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• No. 1036

  Search in the product market and the real business cycle

  Thomas Y. Mathä, Olivier Pierrard

  Published in: The Journal Economic Dynamics and Control (forthcoming).

  24 Mar 2009

  •  1.95 MB Download

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• No. 1035

  The role of labor markets for euro area monetary policy

  Kai Christoffel, Keith Kuester, Tobias Linzert

  Published in: European Economic Review, 53 (2009), 908-936.

  24 Mar 2009

  •  2.06 MB Download

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• No. 1022

  Understanding inter-industry wage structures in the euro area

  Véronique Genre, Karsten Kohn, Daphne Momferatou

  04 Mar 2009

  •  1.05 MB Download

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• No. 1007

  Sequential bargaining in a new-Keynesian model with frictional unemployment and staggered wage negotiation

  Gregory de Walque, Olivier Pierrard, Henri Sneessens, Raf Wouters

  12 Feb 2009

  •  1.35 MB Download

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• No. 1005

  Labor market institutions and macroeconomic volatility in a panel of OECD countries

  Fabio Rumler, Johann Scharler

  12 Feb 2009

  •  874 kB Download

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• No. 974

  Institutional features of wage bargaining in 23 European countries, the US and Japan

  Philip Du Caju, Erwan Gautier, Daphne Momferatou, Melanie Ward-Warmedinger

  Published in: Ekonomia, 12(2), Winter 2009, pp. 57-108.

  02 Dec 2008

  •  1.25 MB Download

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• No. 963

  Public and private sector wages: co-movement and causality

  Ana Lamo, Javier J. Pérez, Ludger Schuknecht

  Published in: partly in The Scandinavian Journal of Economics as "Public or private sector wage leadership? An international perspective" (forthcoming). Partly in Journal of Policy Models as "Are government wages decoupled from private sector wages?" (forthcoming)

  13 Nov 2008

  •  1.32 MB Download

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• No. 945

  Wage and price dynamics in Portugal

  Carlos Robalo Marques

  13 Oct 2008

  •  1.03 MB Download

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• No. 923

  Resuscitating the wage channel in models with unemployment fluctuations

  Kai Christoffel, Keith Kuester

  Published in: Journal of Monetary Economics, 2008 Vol 55(5).

  26 Aug 2008

  •  1.11 MB Download

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Micro Group

• No. 1325

  Wage structure effects of international trade: evidence from a small open economy

  Philip Du Caju, François Rycx, Ilan Tojerow

  Published in: Review of World Economics, 148(2), June 2012: pp. 297-331.

  08 Apr 2011

  •  1.25 MB Download

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• No. 1308

  Myopic governments and welfare-enhancing debt limits

  Malte Rieth

  09 Mar 2011

  •  1.19 MB Download

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• No. 1269

  Downward wage rigidity and automatic wage indexation: evidence from monthly micro wage data

  Patrick Lünnemann, Ladislav Wintr

  01 Dec 2010

  •  1.96 MB Download

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• No. 1268

  Changes in the Austrian structure of wages, 1996-2002: evidence from linked employer-employee data

  Wolfgang Pointner, Alfred Stiglbauer

  16 Nov 2010

  •  1.15 MB Download

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• No. 1242

  Changes in the Czech wage structure: Does immigration matter?

  Kamil Dybczak, Kamil Galuščák

  15 Sep 2010

  •  1.52 MB Download

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• No. 1213

  The incidence of nominal and real wage rigidity: an individual-based sectoral approach

  Julián Messina, Mario Izquierdo, Philip Du Caju, Cláudia Filipa Duarte, Niels Lynggård Hansen

  Published in: Journal of the European Economic Association, 8(2-3), April May 2010, pp. 487-496.

  25 Jun 2010

  •  862 kB Download

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• No. 1199

  Changes in the wage structure in EU countries

  Rebekka Christopoulou, Juan F. Jimeno, Ana Lamo

  20 May 2010

  •  1.14 MB Download

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• No. 1184

  Costs, demand, and producer price changes

  Claire Loupias, Patrick Sevestre

  21 Apr 2010

  •  1.24 MB Download

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• No. 1182

  Inter-industry wage differentials in EU countries: what do cross-country time varying data add to the picture?

  Philip Du Caju, Gábor Kátay, Ana Lamo, Daphne Nicolitsas, Steven Poelhekke

  Published in: Journal of the European Economic Association, 8(2-3), pp. 478-86.

  21 Apr 2010

  •  1.2 MB Download

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• No. 1159

  Wages and the risk of displacement

  Anabela Carneiro, Pedro Portugal

  26 Feb 2010

  •  1.12 MB Download

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• No. 1103

  Inter-industry wage differentials: how much does rent sharing matter?

  Philip Du Caju, François Rycx, Ilan Tojerow

  Published in: The Manchester School, 79(4), July 2011, pp. 691-717.

  21 Oct 2009

  •  1.05 MB Download

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• No. 1083

  Evaluating microfoundations for aggregate price regidities: evidence from matched firm-level data on product prices and unit labor cost

  Mikael Carlsson, Oskar Nordström Skans

  24 Aug 2009

  •  1.03 MB Download

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• No. 1080

  Productivity and job flows: heterogeneity of new hires and continuing jobs in the business cycle

  Juha Kilponen, Juuso Vanhala

  24 Aug 2009

  •  1.01 MB Download

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• No. 1074

  Wages are flexible aren't they? Evidence from monthly micro wage data

  Patrick Lünnemann, Ladislav Wintr

  16 Jul 2009

  •  1.15 MB Download

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• No. 1021

  Rigid labour compensation and flexible employment? Firm-level evidence with regard to productivity for Belgium

  Catherine Fuss, Ladislav Wintr

  04 Mar 2009

  •  1.06 MB Download

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• No. 1006

  Understanding sectoral differences in downward real wage rigidity: workforce composition, institutions, technology and competition

  Philip Du Caju, Catherine Fuss, Ladislav Wintr

  Published in: Journal for Labour Market Research, 45(1), March 2012: pp. 7-22.

  12 Feb 2009

  •  1.14 MB Download

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• No. 1003

  Real wages over the business cycle: OECD evidence from the time and frequency domains

  Julián Messina, Chiara Strozzi, Jarkko Turunen

  Published in: Journal of Economic Dynamics and Control (2009), 33(6), pp. 1183-1200.

  19 Feb 2009

  •  1.04 MB Download

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• No. 964

  Do firms provide wage insurance against shocks? Evidence from Hungary

  Gábor Kátay

  12 Nov 2008

  •  1.24 MB Download

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• No. 893

  Sticky wages: evidence from quarterly microeconomic data

  Thomas Heckel, Hervé Le Bihan, Jérémi Montornès

  16 May 2008

  •  1.25 MB Download

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• No. 854

  How do firms adjust their wage bill in Belgium? A decomposition along the intensive and extensive margins

  Catherine Fuss

  Published in: Labour Economics, 2009, 16(3), 320-329.

  25 Jan 2008

  •  929 kB Download

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• No. 840

  Downward wage rigidity for different workers and firms: an evaluation for Belgium using the IWFP procedure

  Philip Du Caju, Catherine Fuss, Ladislav Wintr

  17 Dec 2007

  •  1.17 MB Download

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Survey Group

• No. 1314

  Price and wage setting in Portugal: learning by asking

  Fernando Martins

  01 Apr 2011

  •  1.35 MB Download

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• No. 1274

  Firms' reactions to the crisis and their consequences for the labour market. Results of a company survey conducted in Austria

  Claudia Kwapil

  03 Dec 2010

  •  1 MB Download

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• No. 1225

  Price and wage formation in Portugal

  Carlos Robalo Marques, Fernando Martins, Pedro Portugal

  16 Jul 2010

  •  1.52 MB Download

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• No. 1224

  Wages, labor or prices: how do firms react to shocks?

  Emmanuel Dhyne, Martine Druant

  16 Jul 2010

  •  888 kB Download

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• No. 1198

  Wage and price setting behaviour of Lithuanian firms

  Ernestas Virbickas

  20 May 2010

  •  971 kB Download

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• No. 1181

  Wage setting and wage flexibility in Ireland - Results from a firm-level survey

  Mary Keeney, Martina Lawless

  21 Apr 2010

  •  1.16 MB Download

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• No. 1164

  Price, wage and employment response to shocks: evidence from the WDN survey

  Giuseppe Bertola, Aurelijus Dabusinskas, Marco M. Hoeberichts, Mario Izquierdo, Claudia Kwapil, Jérémi Montornès, Daniel Radowski

  31 Mar 2010

  •  1.13 MB Download

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• No. 1153

  The determination of wages of newly hired employees: survey evidence on internal versus external factors

  Kamil Galuščák, Mary Keeney, Daphne Nicolitsas, Frank Smets, Pawel Strzelecki, Matija Vodopivec

  23 Feb 2010

  •  1.14 MB Download

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• No. 1106

  The Margins of Labour Cost Adjustment: Survey Evidence from European Firms

  Jan Babecký, Philip Du Caju, Theodora Kosma, Martina Lawless, Julián Messina, Tairi Rõõm

  12 Nov 2009

  •  963 kB Download

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• No. 1105

  Downward Nominal and Real Wage Rigidity: Survey Evidence from European Firms

  Jan Babecký, Philip Du Caju, Theodora Kosma, Martina Lawless, Julián Messina, Tairi Rõõm

  Published in: The Scandinavian Journal of Economics, 112(4), December 2010, pp. 884-910.

  12 Nov 2009

  •  1.04 MB Download

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• No. 1102

  Wage-setting behavior in France: additional evidence from an ad-hoc survey

  Jérémi Montornès, Jacques-Bernard Sauner-Leroy

  29 Oct 2009

  •  1.54 MB Download

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• No. 1084

  How are firms’ wages and prices linked: survey evidence in Europe

  Martine Druant, Silvia Fabiani, Gabor Kezdi, Ana Lamo, Fernando Martins, Roberto Sabbatini

  24 Aug 2009

  •  875 kB Download

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Conferences & presentations

WDN conferences

• "Wage Dynamics in Europe: Findings from the Wage Dynamics Network", Frankfurt am Main, 24-25 June 2008

WDN presentations at international venues

•  2008 CEPR European Summer Symposium in International Macroeconomics (ESSIM), Tarragona, May 2008
•  2009 AEA Annual Meeting, San Francisco, January 2009
•  2009 EEA Annual meeting, Barcelona, August 2009

Reports

• WDN Final report - last update: 7 January 2010
• WDN Final report - Slides from the presentation - last update: 7 January 2010
• 2008 WDN Progress report - last update: 25 September 2009
• 2008 Executive summary of the WDN main findings - last update: 25 September 2009