Working Paper: CEPR ID: DP7706
Authors: Giuseppe Bertola; Aurelijus Dabusinskas; Marco Hoeberichts; Mario Izquierdo; Claudia Kwapil; Jörmi Montornes; Daniel Radowski
Abstract: This paper analyses information from survey data collected in the framework of the Eurosystem?s Wage Dynamics Network (WDN) on patterns of firm-level adjustment to shocks. We document that the relative intensity and the character of price vs. cost and wage vs. employment adjustments in response to cost-push shocks depend - in theoretically sensible ways - on the intensity of competition in firms? product markets, on the importance of collective wage bargaining and on other structural and institutional features of firms and of their environment. Focusing on the pass-through of cost shocks to prices, our results suggest that the pass-through is lower in highly competitive firms. Furthermore, a high degree of employment protection and collective wage agreements tend to make this pass-through stronger.
Keywords: European Union; Labour Market Institutions; Survey Data; Wage Bargaining
JEL Codes: J31; J38; P50
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High competition (L13) | Less likely to increase prices (E31) |
| High competition (L13) | More likely to reduce costs (D61) |
| Collective wage agreements (J52) | Increased likelihood of price increases (E30) |
| Higher share of foreign sales (F23) | Less likely to pass wage shocks to prices (J39) |
| Stringent employment protection legislation (EPL) (J63) | More likely to reduce temporary workers (J63) |