Working Paper Series, FIEF - Trade Union Institute for Economic Research
Taxes, Risk Aversion and Unemployment Insurance as Causes of Wage Rigidity
Abstract: Recent empirical evidence has shown that nominal wages are
more rigid among blue-collar (low income) workers than among white-collar
(high income) workers. We show theoretically that employees in
crisis-ridden firms will reject wage cut proposals that save jobs if risk
aversion is great, replacement rates high and marginal taxes low. These
factors for can explain why wage rigidity is less intense among high-income
earners than among low-income earners. We argue, that with economic growth
nominal wages should become more flexible, since marginal taxes increase,
the marginal utility of income drops, normally, replacement rates fall.
Keywords: Wage rigidity; Marginal taxes; Risk aversion; Unemployment; (follow links to similar papers)
JEL-Codes: H20; J30; J65; (follow links to similar papers)
16 pages, May 25, 2000
Before downloading any of the electronic versions below
you should read our statement on
for viewing Postscript files and the
Acrobat Reader for viewing and printing pdf files.
Full text versions of the paper:
Questions (including download problems) about the papers in this series should be directed to Sune Karlsson ()
Report other problems with accessing this service to Sune Karlsson ()
or Helena Lundin ().
Design by Joachim Ekebom