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Seoul Journal of Economics
[ Article ]
Seoul Journal of Economics - Vol. 28, No. 2, pp.213-236
ISSN: 1225-0279 (Print)
Print publication date 30 May 2015
Received 02 Jul 2014 Revised 07 May 2015 Accepted 08 May 2015

A Study of Downward Nominal Wage Rigidity in Korea

Mihye Lee ; Su-mi Na
Economist, Economic Research Institute, Bank of Korea, Tel: 02-759-5427 mihyelee@bok.or.kr
Ph. D. Student, Department of Economics, Seoul National University lakeadagio@snu.ac.kr

JEL Classification: J30, J6

Abstract

This paper examines downward nominal wage rigidity in Korea using aggregate and individual-level data. We find that the degree of downward nominal wage rigidity differs depending on the data sources used. Results from the aggregate data indicate that, on average, wages have been flexible. By contrast, evidence from the micro data suggests that nominal wages are downwardly rigid most of the time. We also find that downward nominal wage rigidity can differ across industries at both industry and individual levels. At the individual level, wage rigidity is greater in the service than in the manufacturing sector, even though the latter exhibits smaller volatility in its rate of wage growth.

Keywords:

Downward nominal wage rigidity, Unemployment

Acknowledgments

The views expressed herein are those of the authors and do not necessarily reflect the official views of the Bank of Korea. When reporting or citing this paper, the authors’ names should always be stated explicitly.

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