Base Wage Rigidities: Evidence From a Survey of Slovak Firms

Building on a unique survey of how Slovak firms adjust wages and prices, this paper studies the extent to which Slovak wages are rigid and the determinants for both nominal and real wage rigidity. Compared to other countries included in the survey, Slovakia has nominal base wage rigidity that is one of the highest and real base wage rigidity that is also relatively high. Apart from looking at the anecdotal evidence, I run multinomial logit regressions to capture the relationship between real wage rigidity, nominal wage rigidity, flexible wages and a number of firm-specific and institutional characteristics. Regression results suggest that the prevalent skill-level of the workforce matters: firms with mainly low-skilled blue-collar workers face lower probabilities of wage rigidities than firms with white-collar workers. Collective bargaining coverage is also a significant determinant. Firms covered by firm-level unions face higher probabilities of both types of wage rigidities compared to firms not covered by any level of collective bargaining. On the other hand, firms facing sectoral level unions have more flexible wages than those without any collective bargaining.