RW I:Discussion Papers - Rheinisch-WestfÃ¤lisches Institut fÃ¼r ...

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Figure 3: Location of the Lower Bound for Wage Changes in the Real Rigidity Regime 0.1 0.09 0.08 0.07 0.06 log change 0.05 0.04 0.03 0.02 0.01 0 1976 1977 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 Year 66 percent Confidence Interval around Mean Lower Bound Union Wage Growth GDP Deflator Band 1 Notes: Width of the confidence interval is plus/minus one standard deviation around the real rigidity bound, based on the estimated value of the model variance σ 2 r. Model specification I. Sample of workers employed in private sector. Table 1: Possible Regimes Generating Observed Wage Changes Wage Setting Regime Real Rigidity Nominal Rigidity Flexible Constrained Unconstrained Constrained Unconstrained No Error F0 RC0 RU0 NC0 NU0 One Error F1 RC1 RU1 NC1 NU1 Two Errors F2 RC2 RU2 NC2 NU2 34
Table 2: Sample and Simulated Moments of Wage Change Distribution Mean Median Standard Deviation Year Sample Simulated Sample Simulated Sample Simulated 1976 0.067 0.066 0.064 0.064 0.087 0.088 1977 0.072 0.072 0.072 0.072 0.082 0.081 1978 0.058 0.056 0.056 0.056 0.082 0.081 1979 0.070 0.068 0.063 0.063 0.085 0.083 1980 0.070 0.069 0.066 0.066 0.080 0.081 1981 0.054 0.053 0.054 0.054 0.079 0.077 1982 0.041 0.041 0.042 0.042 0.076 0.074 1983 0.035 0.034 0.035 0.035 0.072 0.072 1984 0.049 0.047 0.043 0.042 0.076 0.075 1985 0.040 0.039 0.036 0.036 0.076 0.074 1986 0.042 0.041 0.040 0.040 0.074 0.073 1987 0.037 0.035 0.035 0.035 0.075 0.074 1988 0.034 0.032 0.029 0.029 0.077 0.075 1989 0.044 0.042 0.037 0.037 0.079 0.077 1990 0.063 0.061 0.056 0.056 0.085 0.083 1991 0.069 0.066 0.065 0.065 0.085 0.084 1992 0.059 0.057 0.056 0.056 0.083 0.081 1993 0.039 0.037 0.038 0.038 0.080 0.079 1994 0.028 0.026 0.023 0.023 0.079 0.078 1995 0.042 0.041 0.038 0.038 0.079 0.078 1996 0.021 0.021 0.020 0.020 0.079 0.078 1997 0.019 0.018 0.016 0.016 0.079 0.077 Notes: Simulation based on parameter estimates obtained with model specification I, i.e. only including officially reported individual characteristics as explanatory variables of notional wage changes. Sample of workers employed in private sector 35
Page 1 and 2: Thomas K. Bauer, Holger Bonin and U
Page 3 and 4: RWI : Discussion Papers No. 12 Thom
Page 5: Real and Nominal Wage Rigidities an
Page 8 and 9: which may be termed the rigidity bo
Page 10 and 11: oth in terms of the extent of the r
Page 12 and 13: Agents can only be in one regime at
Page 14 and 15: error in either the starting or in
Page 16 and 17: infrequent measurement error. The p
Page 18 and 19: The central data requirement for th
Page 20 and 21: Taken together, the descriptive evi
Page 22 and 23: percent of wages are set under the
Page 24 and 25: igidities may indeed have substanti
Page 26 and 27: There also seem to be systematic di
Page 28 and 29: working in opposite directions. Unr
Page 30 and 31: ity regimes, respectively, indicate
Page 32 and 33: As the probabilities of the possibl
Page 34 and 35: for the nominal rigidity case. Deri
Page 36 and 37: References Altonji, J., and P. Deve
Page 38 and 39: Figure 1: Sample Mean Wage Changes,
Page 42 and 43: Table 3: Baseline Model Parameter E
Page 44 and 45: Table 5: Specification Analysis: No
Page 46 and 47: Table 8: Macroeconomic Causes of Wa

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