[go: up one dir, main page]
IDEAS home Printed from https://ideas.repec.org/p/nse/doctra/g2019-09.html
   My bibliography  Save this paper

Do Minimum Wages Make Wages more Rigid? Evidence from French Micro Data

Author

Listed:
  • E.GAUTIER

    (Banque de France - Université de Nantes)

  • S. ROUX

    (Insee - Ined - Crest)

  • M. SUAREZ CASTILLO

    (Insee - Crest)

Abstract
How do minimum wages (MW) shape the aggregate wage dynamics when wage adjustment is lumpy? In this paper, we document new empirical findings on the effects of MW on wage rigidity using quarterly micro wage data matched with sectoral bargained MW. We first estimate a micro empirical model of wage rigidity taking into account minimum wage dynamics. We then use a simulation method to investigate implications of lumpy micro wage adjustment for the aggregate wage dynamics. Our main findings are the following. Both national and sectoral MW have a large effect on the timing and on the size of wage adjustments. At the aggregate level, MW contribute to amplify, by a factor of 1.7, the response of wages to past inflation. Ignoring MW leads to underestimate the speed of aggregate wage adjustment by about a year. The elasticities of wages with respect to past inflation, the national MW and industry-level MW are respectively 0.42, 0.17 and 0.16. Finally, there are significant spillover effects of the NMW on higher wages transiting through industry-level MW.

Suggested Citation

  • E.Gautier & S. Roux & M. Suarez Castillo, 2019. "Do Minimum Wages Make Wages more Rigid? Evidence from French Micro Data," Documents de Travail de l'Insee - INSEE Working Papers g2019-09, Institut National de la Statistique et des Etudes Economiques.
    • Handle: RePEc:nse:doctra:g2019-09
    as

    Download full text from publisher

    File URL: https://www.bnsp.insee.fr/ark:/12148/bc6p06zrj57/f1.pdf
    File Function: Document de travail de la DESE numéro G2019/09
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Taylor, J.B., 2016. "The Staying Power of Staggered Wage and Price Setting Models in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2009-2042, Elsevier.
    2. Juillard, M. & Le Bihan, H. & Millard, S., 2013. "Non-uniform wage-staggering: European evidence and monetary policy implications," Working papers 442, Banque de France.
    3. repec:dau:papers:123456789/11158 is not listed on IDEAS
    4. Pedro S. Martins, 2021. "30,000 Minimum Wages: The Economic Effects of Collective Bargaining Extensions," British Journal of Industrial Relations, London School of Economics, vol. 59(2), pages 335-369, June.
    5. Juan Carluccio & Denis Fougère & Erwan Gautier, 2015. "Trade, Wages and Collective Bargaining: Evidence from France," Economic Journal, Royal Economic Society, vol. 0(584), pages 803-837, May.
    6. Sanvi Avouyi-Dovi & Denis Fougère & Erwan Gautier, 2013. "Wage Rigidity, Collective Bargaining, and the Minimum Wage: Evidence from French Agreement Data," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1337-1351, October.
    7. Kahn, Shulamit, 1997. "Evidence of Nominal Wage Stickiness from Microdata," American Economic Review, American Economic Association, vol. 87(5), pages 993-1008, December.
    8. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    9. Denis Fougere & Erwan Gautier & Herve Le Bihan, 2010. "Restaurant Prices and the Minimum Wage," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(7), pages 1199-1234, October.
    10. Alessandro Barattieri & Susanto Basu & Peter Gottschalk, 2014. "Some Evidence on the Importance of Sticky Wages," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(1), pages 70-101, January.
    11. Erceg, Christopher J. & Henderson, Dale W. & Levin, Andrew T., 2000. "Optimal monetary policy with staggered wage and price contracts," Journal of Monetary Economics, Elsevier, vol. 46(2), pages 281-313, October.
    12. David H. Autor & Alan Manning & Christopher L. Smith, 2016. "The Contribution of the Minimum Wage to US Wage Inequality over Three Decades: A Reassessment," American Economic Journal: Applied Economics, American Economic Association, vol. 8(1), pages 58-99, January.
    13. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, vol. 12(3), pages 383-398, September.
    14. Fehr, Ernst & Goette, Lorenz, 2005. "Robustness and real consequences of nominal wage rigidity," Journal of Monetary Economics, Elsevier, vol. 52(4), pages 779-804, May.
    15. Hervé Le Bihan & Jérémi Montornès & Thomas Heckel, 2012. "Sticky Wages: Evidence from Quarterly Microeconomic Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 1-32, July.
    16. Cecchetti, Stephen G, 1987. "Indexation and Incomes Policy: A Study of Wage Adjustment in Unionized Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 5(3), pages 391-412, July.
    17. J. B. Taylor & Harald Uhlig (ed.), 2016. "Handbook of Macroeconomics," Handbook of Macroeconomics, Elsevier, edition 1, volume 2, number 2.
    18. Armin Falk & Ernst Fehr & Christian Zehnder, "undated". "The Behavioral Effects of Minimum Wages," IEW - Working Papers 247, Institute for Empirical Research in Economics - University of Zurich.
    19. Guimaraes, Paulo & Martins, Fernando & Portugal, Pedro, 2017. "Upward Nominal Wage Rigidity," IZA Discussion Papers 10510, Institute of Labor Economics (IZA).
    20. Fregert, Klas & Jonung, Lars, 1998. "Monetary Regimes And Endogenous Wage Contracts: Sweden 1908-1995," Working Papers 1998:3, Lund University, Department of Economics, revised 21 Apr 1999.
    21. repec:nbr:nberre:0126 is not listed on IDEAS
    22. Pedro S. Martins, 2014. "30,000 minimum wages: The economic effects of collective agreement extensions," Working Papers 51, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    23. Armin Falk & Ernst Fehr & Christian Zehnder, 2006. "Fairness Perceptions and Reservation Wages—the Behavioral Effects of Minimum Wage Laws," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1347-1381.
    24. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    25. Olivei, Giovanni & Tenreyro, Silvana, 2010. "Wage-setting patterns and monetary policy: International evidence," Journal of Monetary Economics, Elsevier, vol. 57(7), pages 785-802, October.
    26. Valérie Chouard & Grégory Verdugo & Gilbert Cette, 2011. "Les effets des hausses du Smic sur le salaire moyen," Économie et Statistique, Programme National Persée, vol. 448(1), pages 3-28.
    27. Jeremy R. Magruder, 2012. "High Unemployment Yet Few Small Firms: The Role of Centralized Bargaining in South Africa," American Economic Journal: Applied Economics, American Economic Association, vol. 4(3), pages 138-166, July.
    28. Emi Nakamura & Jón Steinsson, 2008. "Five Facts about Prices: A Reevaluation of Menu Cost Models," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(4), pages 1415-1464.
    29. Christofides, Louis N, 1987. "Wage Adjustment in Contracts Containing Cost-of-Living Allowance Clauses," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 531-536, August.
    30. David Neumark & DMark Schweitzer & DaWilliam Wascher, 2004. "Minimum Wage Effects throughout the Wage Distribution," Journal of Human Resources, University of Wisconsin Press, vol. 39(2).
    31. Ana Rute Cardoso & Pedro Portugal, 2005. "Contractual Wages and the Wage Cushion under Different Bargaining Settings," Journal of Labor Economics, University of Chicago Press, vol. 23(4), pages 875-902, October.
    32. Jean Baldwin Grossman, 1983. "The Impact of the Minimum Wage on Other Wages," Journal of Human Resources, University of Wisconsin Press, vol. 18(3), pages 359-378.
    33. Romain Aeberhardt & Pauline Givord & Claire Marbot, 2016. "Spillover effect of the Minimum Wage in France: An UnconditionalQuantile Regression," Working Papers 2016-05, Center for Research in Economics and Statistics.
    34. Marcus Dittrich & Andreas Knabe & Kristina Leipold, 2014. "Spillover Effects of Minimum Wages in Experimental Wage Negotiations," CESifo Economic Studies, CESifo Group, vol. 60(4), pages 780-804.
    35. Sigurdsson, Jósef & Sigurdardottir, Rannveig, 2016. "Time-dependent or state-dependent wage-setting? Evidence from periods of macroeconomic instability," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 50-66.
    36. Frank Smets & Raf Wouters, 2003. "An Estimated Dynamic Stochastic General Equilibrium Model of the Euro Area," Journal of the European Economic Association, MIT Press, vol. 1(5), pages 1123-1175, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Effrosyni Adamopoulou & Ernesto Villanueva, 2020. "Wage determination and the bite of collective contracts in Italy and Spain: evidence from the metal working industry," Working Papers 2036, Banco de España.
    2. Carbonnier, Clément & Malgouyres, Clément & Py, Loriane & Urvoy, Camille, 2022. "Who benefits from tax incentives? The heterogeneous wage incidence of a tax credit," Journal of Public Economics, Elsevier, vol. 206(C).
    3. Adamopoulou, Effrosyni & Villanueva, Ernesto, 2022. "Wage determination and the bite of collective contracts in Italy and Spain," Labour Economics, Elsevier, vol. 76(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gautier, Erwan & Roux, Sébastien & Suarez Castillo, Milena, 2022. "How do wage setting institutions affect wage rigidity? Evidence from French micro data," Labour Economics, Elsevier, vol. 78(C).
    2. Fougère, Denis & Gautier, Erwan & Roux, Sébastien, 2018. "Wage floor rigidity in industry-level agreements: Evidence from France," Labour Economics, Elsevier, vol. 55(C), pages 72-97.
    3. Denis Fougère & Erwan Gautier & Sébastien Roux, 2016. "The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France," Working Papers hal-01308722, HAL.
    4. Taylor, J.B., 2016. "The Staying Power of Staggered Wage and Price Setting Models in Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 2009-2042, Elsevier.
    5. Hervé Le Bihan & Jérémi Montornès & Thomas Heckel, 2012. "Sticky Wages: Evidence from Quarterly Microeconomic Data," American Economic Journal: Macroeconomics, American Economic Association, vol. 4(3), pages 1-32, July.
    6. Sanvi Avouyi-Dovi & Denis Fougère & Erwan Gautier, 2013. "Wage Rigidity, Collective Bargaining, and the Minimum Wage: Evidence from French Agreement Data," The Review of Economics and Statistics, MIT Press, vol. 95(4), pages 1337-1351, October.
    7. Jeremi Montornes & Jacques-Bernard Sauner-Leroy, 2015. "Wage-setting Behavior in France: Additional Evidence from an Ad-hoc Survey," Journal of Banking and Financial Economics, University of Warsaw, Faculty of Management, vol. 1(3), pages 5-23, May.
    8. repec:spo:wpmain:info:hdl:2441/3mjt8d63i195voq228mf1sr91q is not listed on IDEAS
    9. repec:hal:spmain:info:hdl:2441/3mjt8d63i195voq228mf1sr91q is not listed on IDEAS
    10. Juillard, Michel & Le Bihan, Herve & Millard, Stephen, 2013. "Non-uniform wage-staggering: European evidence and monetary policy implications," Bank of England working papers 477, Bank of England.
    11. Denis Fougère & Erwan Gautier & Sébastien Roux, 2016. "Understanding Wage Floor Setting in Industry-Level Agreements: Evidence from France," SciencePo Working papers Main hal-03459185, HAL.
    12. Shuhei Takahashi, 2017. "State Dependency in Price and Wage Setting," International Journal of Central Banking, International Journal of Central Banking, vol. 13(1), pages 151-189, February.
    13. Denis Fougère & Erwan Gautier & Sébastien Roux, 2016. "The Impact of the National Minimum Wage on Industry-Level Wage Bargaining in France," Working Papers hal-03469977, HAL.
    14. Jósef Sigurdsson & Rannveig Sigurdardottir, 2011. "Evidence of Nominal Wage Rigidity and Wage Setting from Icelandic Microdata," Economics wp55, Department of Economics, Central bank of Iceland.
    15. M. Ali Choudhary & Saima Mahmood & Sajawal Khan & Waqas Ahmed & Gylfi Zoega, 2013. "Sticky Wages in a Developing Country: Lessons from Structured Interviews in Pakistan," School of Economics Discussion Papers 0213, School of Economics, University of Surrey.
    16. Basu, S. & House, C.L., 2016. "Allocative and Remitted Wages," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 297-354, Elsevier.
    17. Dupor, Bill & Li, Jingchao & Li, Rong, 2019. "Sticky wages, private consumption, and Fiscal multipliers," Journal of Macroeconomics, Elsevier, vol. 62(C).
    18. Solórzano Diego & Dixon Huw, 2020. "The Relationship Between Nominal Wage and Price Flexibility: New Evidence," Working Papers 2020-20, Banco de México.
    19. Eijffinger, Sylvester C. W. & Grajales-Olarte, Anderson & Uras, Burak R., 2020. "Heterogeneity In Wage Setting Behavior In A New-Keynesian Model," Macroeconomic Dynamics, Cambridge University Press, vol. 24(6), pages 1512-1546, September.
    20. Peng Zhou & Huw Dixon, 2019. "The Determinants of Price Rigidity in the UK: Analysis of the CPI and PPI Microdata and Application to Macrodata Modelling," Manchester School, University of Manchester, vol. 87(5), pages 640-677, September.
    21. Sigurdsson, Jósef & Sigurdardottir, Rannveig, 2016. "Time-dependent or state-dependent wage-setting? Evidence from periods of macroeconomic instability," Journal of Monetary Economics, Elsevier, vol. 78(C), pages 50-66.
    22. John Grigsby & Erik Hurst & Ahu Yildirmaz, 2021. "Aggregate Nominal Wage Adjustments: New Evidence from Administrative Payroll Data," American Economic Review, American Economic Association, vol. 111(2), pages 428-471, February.

    More about this item

    Keywords

    Wage Rigidity; Minimum Wage; Collective Bargaining;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nse:doctra:g2019-09. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: INSEE (email available below). General contact details of provider: https://edirc.repec.org/data/inseefr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.