Du Caju, PhilipKosma, TheodoraLawless, MartinaMessina, JulianRoom, Tairi2014-08-152014-08-152014-07https://hdl.handle.net/10986/19349Firms very rarely cut nominal wages, even in the face of considerable negative economic shocks. This paper uses a unique survey of fourteen European countries to ask firms directly about the incidence of wage cuts and to assess the relevance of a range of potential reasons for why the firms avoid cutting wages. The paper examines how firm characteristics and collective bargaining institutions affect the relevance of each of the common explanations put forward for the infrequency of wage cuts. Concerns about the retention of productive staff and a lowering of morale and effort were reported as key reasons for downward wage rigidity across all countries and firm types. Restrictions created by collective bargaining were found to be an important consideration for firms in Western European (EU-15) countries but were one of the lowest ranked obstacles in the new EU member states in Central and Eastern Europe.en-USCC BY 3.0 IGOADVERSE SELECTIONAVERAGE WAGEBARGAINING INSTITUTIONSBARGAINING POWERBARGAINING SYSTEMBUSINESS CYCLECLERKSCOLLECTIVE AGREEMENTCOLLECTIVE AGREEMENTSCOLLECTIVE BARGAININGCOLLECTIVE BARGAINING AGREEMENTSCOMPANYCOMPETITIVE MARKETSDISMISSALECONOMIC SHOCKSEFFICIENCY WAGE MODELSEFFICIENCY WAGE THEORIESEFFICIENCY WAGE THEORYEFFICIENCY WAGESEMPLOYEEEMPLOYEE TURNOVEREMPLOYERSEMPLOYMENT CONTRACTSEMPLOYMENT TURNOVEREQUILIBRIUM UNEMPLOYMENTEXISTING WORKFORCEEXPANSIONSEXPLICIT CONTRACTSFIRINGFIRM LEVELFIRM SIZEFIRM SURVEYFIRMSFOREIGN OWNERSHIPHIGH WAGESHIRINGHUMAN CAPITALHUMAN RESOURCESIMPLICIT CONTRACTSINCOMEINDUSTRIAL RELATIONSJOB EXPERIENCEJOBSLABOR CONTRACTSLABOR ECONOMICSLABOR FORCELABOR MARKETLABOR MARKET FLEXIBILITYLABOR MARKET REFORMLABOR MARKET REFORMSLABOR MARKETSLABOR PRODUCTIVITYLABOR REGULATIONLABOR RELATIONSLABOR TURNOVERLABOURLABOUR COSTLABOUR COSTSLABOUR FORCELABOUR MARKETLABOUR MARKET INSTITUTIONSLABOUR MARKET PARTICIPANTSLABOUR MARKET REFORMLABOUR MARKETSLABOUR REGULATIONLABOUR REGULATIONSLABOUR RELATIONSLABOUR TURNOVERLABOUR UNIONSLAYOFFSLONG-TERM EMPLOYMENTMONITORING COSTSMOTIVATIONNOMINAL WAGESPOLITICAL ECONOMYPREVIOUS STUDIESPROBIT REGRESSIONSPRODUCT MARKETPRODUCT MARKET COMPETITIONPRODUCTION PROCESSREAL WAGEREAL WAGESRECRUITMENTREMUNERATIONRETAIL TRADERISING UNEMPLOYMENTSKILLED EMPLOYEESSKILLED WORKERSSTAFFTEMPORARY WORKERSTOTAL EMPLOYMENTTRADE UNIONSTRAINING COSTTRAINING COSTSUNDEREMPLOYMENTUNEMPLOYMENTUNEMPLOYMENT INSURANCEUNION DENSITIESUNIONIZATIONWAGE BARGAININGWAGE BARGAINING SYSTEMSWAGE BILLWAGE DETERMINATIONWAGE DISPERSIONWAGE FLEXIBILITYWAGE INCREASEWAGE LEVELWAGE RIGIDITIESWAGE RIGIDITYWHITE COLLAR WORKERSWORKERWORKER MORALEWORKER PRODUCTIVITYWORKERSWORKING CONDITIONShttps://doi.org/10.1596/1813-9450-6976