Wage Flexibility and Economic Performance: Evidence Across Industrial Countries

Author/Editor:

Magda E. Kandil

Publication Date:

August 1, 2000

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper provides new empirical evidence on the degree of nominal wage flexibility in a sample of nineteen industrial countries. Across countries, aggregate uncertainty increases the degree of wage flexibility in the face of various shocks. Wage flexibility stabilizes fluctuations in real output and guarantees workers a higher real standard of living in response to aggregate demand shocks. Wage flexibility in response to energy price shocks guarantees workers higher real wages without exacerbating price inflation or output contraction. Nominal wage inflation decreases in response to productivity shocks, reinforcing output expansion.

Series:

Working Paper No. 2000/137

Subject:

Frequency:

Annually

English

Publication Date:

August 1, 2000

ISBN/ISSN:

9781451855906/1018-5941

Stock No:

WPIEA1372000

Pages:

31

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