Downward Nominal Wage Rigidity: Unions’ Merit Or Firms’ Foresight?

Type Working Paper
Title Downward Nominal Wage Rigidity: Unions’ Merit Or Firms’ Foresight?
Author(s)
Publication (Day/Month/Year) 2014
URL https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2542516
Abstract
This paper investigates the sources of the downward nominal wage rigidity in Russia. The empirical analysis is based on the RLMS-HSE household survey from 2004 to 2013. We show that, in spite of weak labor unions in Russia, the extent of downward nominal wage rigidity is high. Moreover, the probability of a wage freeze is decreasing in firm size and is lower for industries with industry-level tariff agreements. Our findings present empirical evidence that the main source of the downward nominal wage rigidity is not the labor unions, but firms' voluntary decision to prevent wage cuts, which may cause quits of valuable employees and/or a decrease in their efforts.

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